Poker Machine Manufacturer Could Face Damages Bill Up To $250 Million
October 23, 2009 12:16 pmAustralian company Aristocrat Leisure Ltd, the second biggest poker machine manufacturer in the world, could be facing a colossal damages bill after the company lost a key court case in the US against bondholders. The dispute, which dated back to 2001, involved bond holders having their right to convert their $130 million worth of bonds into stock terminated after the company called for the redemption of the bonds at face value.
In 2005 Aristocrat repaid bondholders after the US court decided that their conversion rights had not been terminated when the company had called for redemption and so were only entitled to monetary damages.
Today’s ruling means that on top of the general damages already awarded, consequential damages amounting to the difference between the bonds value and the price paid by bondholders for shares when they were not allowed to convert their bonds into shares, will also be awarded.
“The company expects that the precise amount of consequential damages recoverable by these claimant bondholders will be determined by the court following further briefing by the parties,” an Aristocrat Leisure Ltd representative said in a statement.
“The amount of general damages for the company’s breach of the bond indenture also remains to be determined by the court. This amount will also be determined by the court following further briefing by the parties.”
Current estimates as to the amount of damages to be awarded vary with analysts agreeing on a figure between $160 million to $250 million.
The market reacted unfavourably to the news with Aristocrat Leisure Ltd share price falling 28c today to $4.91.
The company is still weighing up its options regarding the court’s decision and Aristocrat released a statement at the Australian Securities Exchange yesterday which stated: “The company will review the results of the jury’s verdict and whether to proceed to appeal in respect of the consequential damages and/or general damages determinations.”