Distressed debt specialist Redwood Capital and a group of rival hedge funds led by Cheyne Strategic Value Credit are embroiled in a high-stakes battle over the debt of Hunkemöller, one of Europe’s largest lingerie brands, according to a report by the Financial Times.
In a dispute that highlights the growing prevalence of US-style creditor-on-creditor conflicts in European markets, Redwood Capital this month seized control of the Dutch retailer through a controversial debt restructuring move, prompting the rival group, which includes Man Group, and Contrarian Capital, to explore legal avenues to challenge the takeover, according to sources familiar with the situation.
The group had already sued Redwood and Hunkemöller in New York in November, alleging that an earlier transaction violated bondholder rights.
The dispute is part of a broader trend where hedge funds engage in aggressive debt restructurings – a practice more common in US distressed markets but now gaining traction in Europe.
In 2023, Hunkemöller borrowed €50m in super senior debt from Redwood, which was already the company’s largest bondholder. This transaction ranked Redwood’s new debt ahead of all existing bonds, while also swapping €186m of Redwood’s older bonds into a new, higher-ranking position.
This move effectively pushed rival creditors – including Cheyne and its partners – further down the capital structure, weakening their claim on the company’s assets. Their €84m in senior secured bonds were leapfrogged by Redwood’s new priority debt, prompting the legal challenge.
The creditor group argued in its US lawsuit that this “up-tiering” transaction violated contractual guarantees, effectively diluting their claims in a manner they claim is legally dubious.
Redwood’s aggressive debt strategy is not limited to Hunkemöller. According to sources, the hedge fund has been building a significant position in the bonds of Victoria Plc, a UK-based carpet manufacturer known for supplying red carpets to the British royal family.
