EXPERIAN AND GUS – THE PERILS OF DEBT

Great Universal Stores (GUS) announced in March that it would divest itself of the credit rating company Experian. However to complete the “de-merger” holders of GUS debt must agree. Today’s Economist newspaper indicated that holders of GUS bonds, in the 2013 series worth over $630 million, did not agree to the terms.

The Economist wrote “Whether enough have refused to torpedo the offer remains to be seen, but market observes say they see no reason why anybody would accept when the bonds trade at a higher value than is being offered for them.”

In August 2005 Experian settled Federal Trade Commission charges that it deceptively marketed “free credit reports” by not adequately disclosing that consumers automatically would be signed up for a credit report monitoring service and charged $79.95 if they didn’t cancel within 30 days, in violation of federal law. The fine was $950,000.

Now their parent GUS wants to divest the company and buy back the bonds for less than their market value.