An ad hoc group holding over 72% of the EMTNs in a letter dated Jan. 16 to GKN alleged the engineer had conducted a tender offer of the notes at a "substantial discount to par" without informing it of an "event of default" following a proposal to separate GKN Automotive and GKN Metallurgy.

The group also said its attempts to engage with GKN went in vain and that GKN had also failed to inform ratings agency Fitch of the event of default, which could have potentially led to a misleading rating given to the EMTNs.

A representative for GKN-parent Melrose Industries on Tuesday dismissed the group's allegations.

"The bondholders' claim is 'nonsense' and the company will report the creditor group to the relevant authorities," the spokesperson said in an e-mailed statement to Reuters.

Turnaround specialist Melrose in September said it intended to separate the two automotive and metallurgy divisions and list them as a separate independent business.

The ad hoc group said it was in the process of commencing enforcement action.

($1 = 0.8151 pounds)

(Reporting by Sinchita Mitra in and Pushkala Aripaka Bengaluru; Editing by Maju Samuel and Shinjini Ganguli)