It was a huge mis-sale, exemplary almost for Dutch companies expanding into the US. Just Eat Takeaway (known for Thuisbezorgd.nl) bought Grubhub at the height of the pandemic, for $7.3 billion, only to sell it again 4 years later for $0.65 billion. Of which, 600 million also only involves the assumption of debt in the company, leaving only a $50 million ‘cash’ payment for Just Eat Takeaway.
After the acid....the salt
Sour, then, for the Dutch meal delivery company and its shareholders. But the sale may also be accompanied by a very salty dessert, due to ambiguities in the ‘recipe’ of the 2021 bond issue. Indeed, bondholders see in the recent sale of GrubHub a so-called ‘𝘤𝘦𝘴𝘴𝘢𝘵𝘪𝘰𝘯 𝘰𝘧 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴’, interpreted in the bond terms as: ‘𝘵𝘩𝘦 𝘪𝘴𝘴𝘶𝘦𝘳 𝘰𝘳 𝘢𝘯𝘺 𝘔𝘢𝘵𝘦𝘳𝘪𝘢𝘭 𝘚𝘶𝘣𝘴𝘪𝘥𝘪𝘢𝘳𝘺 𝘤𝘦𝘢𝘴𝘦𝘴 (𝘰𝘳 𝘵𝘩𝘳𝘦𝘢𝘵𝘦𝘯𝘴 𝘵𝘰 𝘤𝘦𝘢𝘴𝘦) 𝘵𝘰 𝘤𝘢𝘳𝘳𝘺 𝘰𝘯 𝘢𝘭𝘭 𝘰𝘳 𝘢 𝘴𝘶𝘣𝘴𝘵𝘢𝘯𝘵𝘪𝘢𝘭 𝘱𝘢𝘳𝘵 𝘰𝘧 𝘪𝘵𝘴 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴. ’
With this type of agreement, it is common to have provisions stating that the loan must be repaid immediately, for example in case of bankruptcy or that certain assets may not be sold. It is, however, essential that these provisions are strictly worded. Because in this case, the question arises: what exactly is ‘ceasing operations’? After all, that is not a legally qualified term.
Moreover, it is questionable whether the sale of a subsidiary is covered by it since the activities at that subsidiary are still continuing, but with a different shareholder. So the prescription is unclear and open to interpretation and that is exactly what you don't want. Certainly not here.
More than $250 million
Because the bondholders involved in this case represent more than 50% of the bonds maturing in 2028 (500 million). If $50 million cash from the deal is to be used to then pay more than $250 million cash in early redemption, the meal is being eaten very salt by Just Eat Takeaway. Especially since the bonds are trading at 91 cents to the dollar, effectively requiring Just Eat Takeaway to redeem 10% above market value as well. This would be a disaster for the meal delivery company (which would still be able to invoke reasonableness and fairness, for instance, if this would jeopardise the continuity of the company).
The next few months should reveal whether Just Eat Takeaway will be allowed to get on its bike to deliver the >$250 million quickly to the bondholders, or whether it will actually be delivered to its own home.
