Piraeus Bank is taking its $85.6m claim against Greek former shipowner Michael Zolotas to trial in London next year.
The bank filed its claim in February last year but co-defendants Zolotas, his company Grandunion and its vessel-owning subsidiary Grand Anemi have not yet responded in the case and have failed to acknowledge service of court documents.
Piraeus Bank is claiming damages for breach of a financial agreement signed between lender Marfin Egnatia Bank and Grand Anemi in August 2009.
The $85.6m claim includes a principal amount of $53.7m that is outstanding under a $112m revolving credit facility provided in 2009 to Grand Anemi by Marfin Egnatia.
Also added in is $31.8m in default interest accrued between 2013 and 2019.
The other defendants Grandunion Inc — the predecessor company to formerly Nasdaq-listed shipping company NewLead Holdings — and Michael Zolotas provided guarantees and indemnities in support of the financial agreement, legal documents show.
But Piraeus claims that Grandunion and Zolotas breached the contract by failing to satisfy their payment obligations to the bank.
According to the claim, Zolotas was the ultimate beneficial owner of Grandunion, which was dissolved in 2015, as well as of Grand Anemi, which is no longer trading and is assumed to have been dissolved around 2017.
The rights of Marfin Egnatia, the Greek branch of Cyprus' former Marfin Popular Bank, were assigned to Piraeus Bank when it took over the lender in 2013.
Zolotas did not immediately respond to a request for comment for this story.
Trial next year — or sooner
A case management conference for the claim was held via Skype on Friday, at which TradeWinds was present.
High Court Justice Andrew Baker ruled that the case will be heard in a two-day trial in the London High Court in February next year, although this could possibly be brought forward to December.
Baker said he would order the bank to give extended disclosure, but said that it was not necessary to order the defendants to do the same, given that they are not expected to participate in the proceedings.
The bank has sought a full trial for its claim, rather than a summary or default judgment, because it wants to attain independent judgment based on the merits of the case.
But Baker observed that, in doing so, the bank would have to "take the risk that it might not be right" in its claims.
The defendants have already admitted liability in respect of the sums owed to Piraeus Bank, according to the bank's particulars of claim.
Zolotas met with Marfin representatives in 2014 to discuss the outstanding amount, but ultimately no resolution was reached.
History of the financing
The original loan was not secured against assets, but was instead supported by personal guarantees and indemnities from Grandunion and Zolotas, plus "a number of share exchanges executed by Grandunion in favour of the lender", Piraeus Bank said in court documents.
Up to $89.5m of the $112m revolver was to be used to refinance the borrowers' existing debt with Marfin Egnatia, with the rest used for "working and investment capital", according to the loan agreement included in the claim.
A total of €120.4m ($135m today) was drawn down from the facility in August 2009, but a repayment log included in the claim shows that the borrowers made only three capital repayments of the Grand Anemi loan.
Some €62.5m was repaid by the end of July 2010, after which overdue and penalty interest continued to accrue.
Just three years after the loan had been secured, Grand Anemi made an overdue interest repayment of just €15.52 on 30 July 2012 and failed to repay anything more.
After making numerous demands, Marfin finally informed the borrowers in March 2013 that the facility was cancelled and that the "indebtedness was immediately due" to the lender.
Piraeus Bank alleged that Zolotas "provided a number of further securities" after meeting Marfin representatives in 2014 and submitted a further proposal for restructuring in January 2016, but no resolution was reached with the lender.
Breach of contract
Piraeus Bank also claimed that Grand Anemi did not notify its lender of any events of default or of any steps being taken to mitigate the situation.
The loan agreement included an undertaking in which Grandunion and Zolotas were obliged not to dispose of assets without the lender's prior written consent.
Piraeus Bank claims Zolotas breached this part of the agreement because Grand Anemi did not obtain Marfin's permission prior to Zolotas' transfer of his shares in Aurora Properties Inc to his wife, Chrysanthi Giara, in May 2010.
Marfin Egnatia Bank played a part in recapitalising the now-defunct shipping company NewLead Holdings when it was formed in October 2009 via a reverse merger between Aries Maritime and Grandunion.
As part of the merger's complicated arrangement, Aries issued $145m in 7% senior unsecured convertible notes to Zolotas' private company Focus Maritime Corp.
All of the outstanding notes owned by Focus were pledged to Marfin Egnatia, which also financed the bonds' acquisition, according to NewLead's securities filings.
Convertible notes
The notes themselves were convertible into shares of NewLead's common stock, which inherited Aries' listing on the Nasdaq bourse through the reverse merger.
Separately, Zolotas is currently on trial in Cyprus for allegedly using Focus Maritime Corp to pay a €1m bribe to the former governor of the Central Bank of Cyprus.
Cyprus allegations
Prosecutors in Cyprus have alleged that the bribe was paid so that Christodoulos Christodoulou would turn a blind eye to the acquisition of a controlling stake in Cyprus’ Popular Bank in 2006 by Marfin Investment Group, which was controlled by shipping lawyer Andreas Vgenopoulos.
Vgenopoulos became head of Marfin Popular Bank and was also indicted in Cyprus in the Focus case, but passed away in November 2016.
TradeWinds has contacted both Piraeus Bank's counsel and Michael Zolotas for comment, but neither responded.
