Spotlight
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Clarity versus confusion in leveraged finance: Part 2
Part 1 of this article, published in last month’s edition of this journal, highlighted the significant uncertainty in the meaning of the contractual terms of large scale leveraged finance transactions. Part 2 of this two-part article explores how the ambiguity and uncertainty in leveraged loan terms is not simply explainable by reference to market conditions; leveraged finance lawyers working in large international law firms in London have played a key role as engineers of this ambiguity. Lawyer activity in this sector is closely connected to the compromised independence of the lawyers who act for the bank lenders, symbolised by the controversial practice of lawyer designation. This compromised independence can in turn be understood as a consequence of the series of law firm and market-based dynamics which are explored in this article. The article also examines how the lawyers who act for private equity sponsors have, in response, engaged in contractual boundary pushing, a key element of which is the retention, insertion and exploitation of ambiguous drafting.
11 August 2025Clarity versus confusion in leveraged finance: Part 1
Drawing on the author’s empirical research, this two-part article zooms in on the significant ambiguity in the language of European leveraged finance contracts, which generates confusion for the parties as to the meaning of key terms. This type of ambiguity also has negative implications for markets. Examples considered in Part 1 of this article include the “J. Crew trap door”, ambiguous permitted indebtedness covenants, and spurious and uncertain add backs to financial covenants. Part 2, to be published next month, explores the role that leveraged finance lawyers working in large international law firms in London played as engineers of this ambiguity.
27 June 2025Preserving guarantor liability: another look
In this Spotlight article, Richard Salter KC takes a further look at how well the sort of Guarantee and Indemnity provisions commonly found in standard LMA-based Facility Agreements are likely to survive changes to the underlying facilities, and considers the implications of the recent decision of the Supreme Court in Cobalt Data Centre 2 LLP v HMRC [2024] UKSC40, [2024] 1 WLR 5213.
09 June 2025Between co-operation and collusion? Liability Management Exercises in Europe
In this Spotlight article the author considers how UK and EU competition law principles might apply to US-style Liability Management Exercises or “co-operation agreements” between creditors and how any competition law risks might be managed.
06 May 2025Cryptoassets are choses in action
This article discusses three key recent cases from Singapore, England and Australia: ByBit FinTech Ltd v Ho Kai Xin [2023] SGHC 199; D’Aloia v Persons Unknown [2024] EWHC 2342; and Re Blockchain Tech Pty Ltd [2024] VSC 690 and argues that it is not merely possible to see cryptoassets as choses in action, but analytically preferable. It explores the analytical advantages of this view.
04 April 2025Drafting for sustainable lending: LMA green v SLL loan provisions
This Spotlight article examines the LMA’s Draft Provisions for Green Loans, which were published on 7 November 2024, and provides a highlight of the key aspects of the drafting, as well as a comparison with the Draft Provisions for sustainability-linked loans.
02 March 2025Credit brokers as fiduciaries, and consequences for lenders: Part 1
The Court of Appeal's decision in Johnson v FirstRand Bank LTD (London Branch) (t/a MotoNovo Finance); Wrench v FirstRand (London Branch) (t/a MotoNovo Finance ); Hopcroft v Close Brothers Ltd [2024] EWCA Civ 1282 that, as credit brokers, motor dealers owe fiduciary duties to their customers has caused uncertainty across the financial services sector.
This article, published in two parts, argues that the judgment was fundamentally flawed as regards the existence of fiduciary duties, and the commission of dishonest assistance (see Part 1), the nature of the tort of bribery, and as to remedies (see Part 2).
Credit brokers as fiduciaries, and consequences for lenders: Part 2
The Court of Appeal’s decision in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance); Wrench v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance); Hopcraft v Close Brothers Ltd [2024] EWCA Civ 1282 that, as credit brokers, motor dealers owe fiduciary duties to their customers has caused uncertainty across the financial services sector. This Spotlight article, published in two parts, argues that the judgment was fundamentally flawed as regards the existence of fiduciary duties, and the commission of dishonest assistance (see Part 1), the nature of the tort of bribery, and as to remedies (see Part 2).
09 February 2025Financial regulation and the search for growth
Growth is a big issue currently. “Unlocking long term growth” appears on the first page of the budget statement. At the time of writing, the OBR forecast is for the UK to grow 1.1% this year and 2% in 2025. These are historically low rates. If they are not significantly surpassed, it is hard to see how the government can pay for its plans without more tax rises. But, in order to grow, the economy requires access to funding. That largely comes from the financial system. Until recently, the financial system’s efficiency has come under little scrutiny. But that is now changing, as Rachel Reeves’ 2024 Mansion House speech indicates.
12 January 2025Artificial intelligence in financial markets: systemic risk and market abuse concerns
The prospect of widespread adoption of advanced artificial intelligence (AI) models in financial markets, particularly reinforcement learning and deep learning techniques, has raised significant concerns among regulators. Although there is no clear evidence that these AI techniques are currently prevalent in trading systems, regulators warn that their future integration could heighten systemic risks and introduce novel forms of market manipulation. This Spotlight article examines whether the characteristics of advanced AI systems create new forms of market instability and explores the challenges they present to existing market abuse detection and prevention frameworks.
22 November 2024
