Consent payment in a restructuring held to be valid
By Brian Cain
Consent payment or solicitation payments have become a relatively common way in which debtors undergoing a restructuring can incentivise bondholders to vote in favour of the restructuring. There has always been a nagging doubt that such payments amount to unlawful bribes or offend a pari passu ranking clause. That doubt has now been resolved.
The issuer of certain notes wanted to implement a restructuring involving amendments to the terms of those notes. In the documents calling the noteholder meeting to consider the resolutions to effect the relevant amendments, it was made clear that, subject to the relevant resolutions being passed, there would be a payment to each noteholder who voted in favour of the resolution of $26 (£17) for each $1,000 of relevant notes held. This consent payment was also explained at the noteholder meeting.
The resolutions were duly passed at the meeting but one noteholder who did not vote and who consequently did not receive the consent payment later claimed that those payments were a breach of contract by the issuer because there was a clause in the notes to the effect that all noteholder claims were to rank equally among themselves and the general pari passu principle of English law that creditors in the same class should be treated equally…
If you are registered and logged in to the site, click on the link below to read the rest of the Taylor Wessing briefing. If not, please register or sign in with your details below.
News from Taylor Wessing
News from The Lawyer
Briefings from Taylor Wessing
The VAT pilot programme (initially launched in Shanghai on 1 January 2012) provides for VAT exemption for certain qualified cross-border services that are rendered by a service provider in China to an overseas service recipient.
In this briefing, Taylor Wessing looks at the termination process for senior executives in various countries.
Analysis from The Lawyer
The city-state is working hard to become a global wealth management hub, and law firms are gearing up for a prosperous new world
Financial disputes are starting to dominate the English courts as the long-awaited fallout from the downturn finally comes to town