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Tacking: what further advances since 2002?
In this article, the authors consider issues of interest to the syndicated loan market in the context of the “tacking of further advances” to existing lending secured by registered land, or mortgages of registered land, in light of s 49 of the Land Registration Act 2002, developments in jurisprudence on the topic, and the work of the Law Commission. The authors are indebted to Mr Trevor Moore, for his article in this journal entitled ‘Real Estate as Security following The Land Registration Act 2002’ (2004) 2 JIBFL 56, upon which this work builds. This work assesses developments since that date and addresses problems arising in the modern loan market where; syndicate lenders make further advances directly to the borrower under ancillary facilities/RCFs; where loan agreements state that the obligation to make a further advance does not apply for so long as there is an un-remedied breach of covenant; how the concept of the “agreed maximum amount” operates under facilities where there are incremental loans and up-tiering transactions; and how the absence of a robust intercreditor agreement with a subsequent chargee can expose the “senior” lenders to US-style “lender-on-lender” violence.
29 July 2024Mandatory collateralisation of hedging transactions under senior secured facilities
This article considers the implications of mandatory collateralisation being applied to hedging transactions under senior secured facilities.
29 July 2024IOSCO Leveraged Loans and Collateralized Loan Obligations (CLOs) Good Practices for Consideration: how will this impact leveraged loan documentation?
On 3 June 2024, the International Organization of Securities Commissions (IOSCO) published its final report on Leveraged Loans and Collateralized Loan Obligations (CLOs) Good Practices for Consideration . This guidance follows an extensive market consultation exercise which examined the impact on leveraged loan investors of fewer and looser covenant protections in transaction documentation together with a number of other conduct and transparency concerns within the market. In this article Lee Federman and Adam Wolinsky consider four of the good practice measures which focus on key transaction terms.
26 July 2024(Un)reasonable endeavours: force majeure clauses and offers of non-contractual performance
Can a party be required to accept an offer of non-contractual performance so as to overcome what would otherwise be a force majeure event? In its recent decision in MUR Shipping BV v RTI Limited , the Supreme Court held that the answer to this question was “no”, finding that the Appellant was not obliged to accept an offer by the Respondent to pay in euros where the contract provided for payment in USD. While the court’s decision may provide parties with greater certainty when it comes to force majeure clauses, this certainty arguably comes at the expense of a “business common sense” approach, and leaves open the possibility that a contract may be suspended or terminated even where a force majeure event could have been overcome by acting reasonably.
26 July 2024Lex situs and its discontents: English security over foreign assets
This article examines the distinction between the contractual and proprietary effects of a transaction in the context of English security over foreign assets. In particular, it considers the way in which creditors address, before and after transacting, the ineffectiveness of English security under the lex situs and the important role of equities arising between the contracting parties.
26 July 2024Security release filings, a rogue filer and the Economic Crime and Corporate Transparency Act
News broke earlier this year that roughly 800 security release filings, affecting 190 companies, had been fraudulently filed at Companies House, marking the underlying security interests as satisfied when they remained outstanding. New powers given to the Registrar of Companies under the Economic Crime and Corporate Transparency Act 2023 were used to rectify the register. The case shone a spotlight on the vulnerabilities of the system for registering the release of security.
29 June 2024When AI trading bots go rogue, think outside the (black) box
Chatbots have been dominating the headlines with some wildly entertaining reminders of the importance of understanding AI’s limitations. Trading bots deserve some attention too, not least because a lot of trading in financial markets is automated through software programs which could (and in some cases already do) use AI. We have seen cases where deterministic bots have concluded trades in the middle of the night at bizarre prices, or have gone shopping on the dark web and been arrested (confiscated) for doing so. This article swaps out the deterministic bots for AI bots and considers whether conventional legal principles still work.
29 June 2024Certain key issues in private credit: loan structuring, tax issues and conflict considerations
This article examines certain issues that are particularly relevant for private credit funds as opposed to traditional bank financing, including timing considerations when making debt investments, key points from a lending perspective under investment loan documentation and potential conflicts of interest.
29 June 2024Does a bank owe a “retrieval duty” to the victims of fraud?
This article considers whether there should be a “retrieval duty” on banks to recover monies transferred as a result of an alleged fraud, following the failed strike-out application in CCP Graduate School Limited v National Westminster Bank PLC [2024] EWHC 581 (KB).
29 June 2024The mysterious pari passu principle
We know that Lord Justice Snowden’s landmark judgment for a unanimous Court of Appeal in Adler earlier this year1 emphasised the presumptive importance of the pari passu principle. But what does this principle amount to? What does it require? The term “pari passu” is used in judicial and textbook writings to refer to no fewer than four different principles. Regrettably, this is a reliable recipe for confusion. Three of these principles relate to distribution of value from the insolvency estate but are very different from each other, while the fourth is a principle of conservation rather than distribution. The undifferentiated and unreflective use of the term “pari passu” for one or other of these four principles leads to mistakes of both analysis and decision. This article explains the four principles, outlines the ways in which they differ, highlights the confusion resulting from not distinguishing amongst them, and argues that the term “pari passu” should be restricted to only one of the four.
29 June 2024
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