A recent High Court case (Fairhold Securitisation Limited v Clifden IOM No 1 Ltd) has affirmed that in debt issuances involving a trustee, noteholders have only limited rights to take direct enforcement action.  The case confirmed that:

  • trustees do not need to act on holders’ instructions until holdings have been verified;
  • on receipt of instructions, a trustee is not bound to act until it has had a reasonable time to verify holdings, review instructions, take advice and obtain satisfactory indemnification;
  • where a trustee holding a floating charge is obliged to take enforcement action, its failure to do so does not entitle noteholders to step into the shoes of the trustee and appoint administrators.

Continue Reading When the shoe does not fit: direct action clauses – can investors step into the Trustee’s shoes to enforce?

The Second Circuit recently issued its decision on an appeal to the Momentive Performance Materials Inc. (“MPM”) bankruptcy case. Amongst other issues, the Court found that when determining the appropriate interest rate in a Chapter 11 cramdown, courts should consider market factors rather than strictly apply the Till formula. The Court’s decision will benefit secured creditors when a market rate is ascertainable, as they will no longer have to accept below-market take-back debt.

Continue Reading Impact of Second Circuit’s Momentive decision on interest rates under Chapter 11