Creditors of defunct TPG funds defend forced bankruptcy

March 20 (Reuters) - Creditors of defunct financing vehicles of private equity giant TPG Capital are escalating a battle over whether a dissolved entity can be forced into bankruptcy. In court papers filed on Monday, the creditors asked a bankruptcy judge to deny a bid by one of the financing vehicles to have an involuntary Chapter 7 bankruptcy petition dismissed. The creditors, a group of hedge funds led by SPQR Capital, filed the bankruptcy petition in December against TPG Troy LLC. TPG Troy argued last month that it could not be in bankruptcy because, essentially, it no longer exists. But SPQR and fellow creditors say dissolved companies are still liable for their debts. The creditors hold notes issued by subsidiaries of TIM Hellas, a Greek telecommunications company that was owned in part by TPG Troy. They claim they are owed 111 million euros ($143 million) after Hellas defaulted on the notes. The default, they argue, was caused by an "elaborate shell game" of money transfers orchestrated by TPG Troy to keep money out of creditors' hands. The default has led to an onslaught of litigation from the noteholders. According to court papers filed last month by TPG Troy, it faces 13 lawsuits in New York, California, Delaware and Europe, which it said amounted to "forum shopping" by its creditors. SPQR's attempt to use bankruptcy court to resolve the matter is just one more example of forum shopping, TPG Troy said. The TPG Troy case is not first one in which bankruptcy has been used as a way to resolve a technical financial dispute. In 2011, Zais Investment Grade Ltd VII, or ZING, was forced into bankruptcy by noteholders for the purpose of liquidating certain notes. ZING, an issuer of collateralized debt obligations, had no business operations, no officers, and no headquarters outside a Cayman Islands mailbox. Jared Stamell, a lawyer for SPQR and other creditors in the TPG Troy case, said the growing complexity of financial instruments has brought about unconventional uses of bankruptcy. Read the rest at http://newsandinsight.thomsonreuters.com/Bankruptcy/News/2013/03_-_March/Creditors_of_defunct_TPG_funds_defend_forced_bankruptcy/