Ad Hoc Group of Holders of Pearl Group Notes Disappointed by Proposed Exchange Offer and Amendments

LONDON, Jan. 6 /PRNewswire/ -- The ad hoc group ("Noteholder Group") of holders of the 500,000,000 pounds Sterling 6.5864 per cent Fixed/Floating Rate Perpetual Reset Capital Securities (ISIN Number: XS0235245205) ("Notes") issued by Pearl Group Holdings (No. 1) Limited ("Pearl") consists of many of the largest institutional investors in Pearl's industry in the United Kingdom, holding in excess of 60% of the outstanding Notes - members include Abaci Investment Management, AXA Investment Managers, F&C Investments, Fidelity International, MSD Capital, Oceanwood Capital Management and Rathbones Investment Management. The Noteholder Group formed in light of material concerns raised by Pearl's private acquisition and intercompany asset transfers in 2008. As outlined in the Noteholder Group's release of 1 July 2009, Noteholders considered that these transactions had the effect of depriving them of fundamental rights and protections.

Since its formation, the Noteholder Group has sought to engage Pearl on means to address these concerns, including through a possible Notes amendment or exchange that would restore the previous rights and that would help protect against a repeat of the 2008 transactions. In recent months, Pearl has seemed to be cooperating with the Noteholder Group's Steering Group (the "Steering Group"). There has been a period of due diligence and an exchange of restructuring proposals. The Steering Group notes that Pearl's operating performance and results have improved during this period.

Disappointingly, however, Pearl now appears to have suspended the cooperative process, and has made an offer to exchange and amend the Notes that seeks material financial concessions from Noteholders, but Pearl has not addressed the Steering Group's stated concerns or objectives. The Steering Group does not support Pearl's proposed exchange or amendments, and the Steering Group urges all holders of the Notes to reject the proposals unless they are improved to address the Steering Group's concerns and objectives. Reasons for this position include:

1. The Steering Group has been shown no justification whatsoever for the proposed waiver of the coupon payment that was deferred in April 2009. All publicly available evidence indicates that Pearl has the wherewithal to pay such deferred coupon at this time. In fact, the Steering Group understands Pearl plans to pay dividends to its shareholders. As such, there is no basis on which creditors such as the Noteholders should agree to relinquish the right to payment of any coupons.
2. The Steering Group has been shown no justification whatsoever for the proposed 25% discount to the face amount of the Notes. The Steering Group has no evidence that Pearl is insolvent or otherwise unable to sustain the obligation evidenced by the Notes. In the absence of such evidence, and in the absence of fair consideration, there is no basis on which Noteholders should agree to reduce the amount of their claims against Pearl.
3. The Steering Group has concerns about the structure of the proposed transaction and the impact on Noteholders' rights, particularly in light of the proposed Noteholder concessions. Noteholders should be cautious about agreeing concessions to Pearl in this context.

The Steering Group remains available to discuss alternative arrangements with Pearl. In the absence of Pearl's agreement to address its concerns, the Steering Group will investigate other means of ensuring that its interests are effectively addressed. Interested holders of the Notes are encouraged to contact the Noteholder Group through counsel. Counsel contact details are as follows:

Bingham McCutchen (London) LLP

41 Lothbury

London EC2R 7HF

    Attn:   Timothy B. DeSieno
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          +1 212 705 7426
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          [email protected]
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          Paul Durban
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          +44 20 7661 5419
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          [email protected]
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SOURCE Bingham McCutchen LLP