News / CEVA plaintiffs get injection of hope from shift in gear

29/03/2018

CEVA’s impending IPO on the Swiss Stock Exchange and the appointment of a new judge has given the executives suing shareholder Apollo Global Management new confidence.

Apollo, the controlling shareholder of CEVA, and two of its directors are facing two cases: a bankruptcy case in New York and a class action in Florida.

While it was decided that the latter case was “derivative” and is currently in abeyance, the New York action is continuing.

This week, the “trustee” of defendants CIL Ltd and CEVA Logistics Ltd changed its law firm.

Apollo, which famously bought TNT Logistics and EGL Logistics and combined them to create CEVA, required executives of both companies to put “skin in the game” and buy shares in the new entity.

However, despite a Morgan Stanley report which valued the company at up to $3.75bn, which would have satisfied debt obligations and provided value for equity holders, Apollo unilaterally decided to arrange a debt-for-equity swap, the lawsuit alleges, after buying some of CEVA’s discounted debt.

As a result, Apollo retained ownership, but the CEVA executives lost their combined $20m stake – which they discovered in a letter which said “…it is unlikely that there will be any recoveries for shareholders”, alleges the lawsuit.

According to court documents, one manager, who had borrowed $102,000 for the “requirement for all senior managers to have an investment in the company”, contacted the defendant in November 2012 inquiring about his investment. He was informed that “the investment remains in the care of the company. There is not currently a process that would enable you to exit the plan by selling your CEVA Investments Limited stock.”

According to the court filing, the response made no mention of CEVA Investments being in a precarious financial situation. Yet just five months later, the shareholder received the letter stating that his shares in CEVA Investments were now worthless.

The case continues.