On February 8, 2016, Chimicles & Tikellis LLP brought a class action (the “Action”) on behalf of Plaintiff Kenneth Roth (“Plaintiff”) and all other holders (the “Bondholders”) of the 7.45% Quarterly Interest Bonds due 2032 (the “Bonds”) (CUSIP: 71902E 20 8) issued by The Phoenix Companies (“Phoenix” or the “Company”) against Phoenix as well as the U.S. Bank National Association (“Trustee”) (Phoenix and the Trustee are collectively referred to as “Defendants”). Phoenix, a publicly-traded insurance company, has outstanding approx. $252 million of Bonds which currently trade on the New York Stock Exchange under ticker “PFX”. The caption for this action is: Kenneth Roth on behalf of himself and all similarly-situated bondholders v. The Phoenix Companies, Inc. and U.S. Bank National Association, in its capacity as Trustee, Index No. 650634/2016, was filed in the Supreme Court of the State of New York, County of New York.
On March 24, 2017, the Court entered a Decision & Order granting final approval of the Stipulation and Settlement. In its Order, the Court stated that the “Settlement is outstanding”, and that it provides for “expeditious beneficial relief for the class that affords them material remedial disclosures…” The Court also noted that “Class counsel performed substantial work and obtained an extremely favorable result for the class.” A copy of the Order can be accessed here.
As set forth in the complaint, on September 29, 2015, the Company announced a going-private merger whereby the common stockholders of Phoenix will be cashed out while the Bonds remain outstanding (“Merger”). In connection with the Merger, on January 7, 2016, Phoenix launched a consent solicitation (“Consent Solicitation”) seeking the Bondholders’ approval to a proposed Supplemental Indenture that would, if approved, amend § 704 of the Indenture. Bondholders are being asked to consent to a material amendment to the document that serves to protect their fundamental rights as Bondholders, the Indenture Agreement, as amended on February 21, 2014. The complaint alleges that the Consent Solicitation is materially misleading. As alleged in the complaint, Bondholders are being asked to consent to material amendments, including an amendment that would: (a) jettison Bondholders’ right to receive material financial information, to which they are otherwise entitled; and (b) allow the Trustee to waive material duties otherwise owed to the Bondholders. The complaint alleges that the impact on Bondholders if the Supplemental Indenture is adopted is significant because without access to material financial information, the Bondholders will not have critical information about the security underlying the Bonds, and will be unable to know about or assess the Company’s ability to comply with the financial obligations owed to the Bondholders, as set forth in the Indenture.
Moreover, the complaint alleges that the Consent Solicitation is false and misleading and omits material information by:
- failing to inform Bondholders of their current right to information under § 704 of the Indenture;
- failing to inform Bondholders that, absent the amendment, they remain entitled to receive meaningful financial information;
- presenting the amendment as necessary and beneficial to the Bondholders (which it is not) because the amendment will assure that some financial information will continue to be provided by the Company to the Trustee (which is, nevertheless, waiving any obligation and responsibility to even look at the financial information);
- giving Bondholders the false and misleading impression that the Supplemental Indenture is actually beneficial to Bondholders and enhances existing disclosures;
- failing to explain and discuss, but instead burying it in the Consent Solicitation, the waiver of the Trustee’s fundamental obligations with respect to the financial information;
- failing to inform Bondholders how, if the amendment is approved, the Company will take steps to exempt itself from any state or federal reporting requirements, that would have otherwise triggered reporting obligations to the Bondholders under the Indenture; and,
- omitting the fact that (including related discussion of how) the Supplemental Indenture will impact the value of and secondary market for the Bonds.
In sum, the complaint alleges that unless stopped, the Company will eliminate the single protection available to Bondholders– the unequivocal right to access financial information about the Company to whom they lent money.
On February 25, 2016 Chimicles & Tikellis entered into a memorandum of understanding (“MOU”) and thereafter entered into a Stipulation and Agreement of Compromise, Settlement, and Release (the “Stipulation”) dated September 14, 2016, proposing the settlement of this Action. In addressing concerns over the lack of sufficient information to evaluate the Bonds and their value in the secondary market following consummation of the Merger, Plaintiff entered into the Stipulation to secure the following benefits for Bondholders:
- Bondholders will now have access to financials and other corporate information pursuant to the amended Fourth Supplemental Indenture once Phoenix is no longer required to file reports with the Securities and Exchange Commission (“SEC”). Phoenix would have no obligation to file with the SEC under securities laws once it delists from the NYSE and deregisters the Bonds based on the current number of registered bondholders.
- Prospective purchasers of the Bonds, securities analysts and market makers will likewise have access to the same financial and corporate information.
- Upon request, Bondholders, prospective purchasers of the Bonds, securities analysts and market makers will be given prompt access to the following information via a password protected website: (i) the financial statements and related information set out in Section 704 in the Fourth Supplemental Indenture; (ii) the information required to be made available to Bondholders pursuant to the Trust Indenture Act; and (iii) quarterly and annual general account financial statements of Phoenix Life and PHL Variable (and their successors and assigns) as filed with state insurance regulators of such entities.
Bondholders are being provided with a Consent Solicitation Supplement that, among other disclosures: (i) details the process by which Bondholders, prospective purchasers of the Bonds, securities analysts and market makers will get access to information; (ii) explains that Phoenix remains the obligor under the Indenture; (iii) provides additional explanation about the Trustee’s duties under the Fourth Supplemental Indenture; and (iv) explains the approximately $16 million in Bonds held by “the Company and its affiliates.”
If you possess information relevant to this action, or purchased the Bonds and would like to discuss your legal rights and options, please contact attorney Catherine Pratsinakis, Esq. by telephone at (610)649-1497, by email at firstname.lastname@example.org, or via the “Email us about this Case” button, below.