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Contractual novations: the “partial novation” phenomenon and is advance consent absolute?
Loan agreements, particularly those documenting a syndicated lending arrangement, may provide that a lender’s rights and obligations are transferable to another bank or financial institution by delivery of a duly completed and executed transfer certificate to a designated person, such as a facility agent. The borrower’s active participation is not required in this process. That has not prevented English law from recognising the transfer to be an effective novation, for the borrower is said to have consented in advance to the novation through its agreement to the transfer clause. Is the lender’s ability to transfer its loan interests an unfettered one? An interesting question also arises as to the effect of a novation with one lender on the other syndicate lenders’ contracts.
19 March 2024Improper leverage? Own interest conflicts and the designation model in leveraged finance transactions
Designation in leveraged finance deals – the process by which the sponsor’s solicitors select the solicitors to act for the lender – has become increasingly controversial and is attracting the attention of regulators. It has the obvious potential to give rise to suggestions that the lender’s solicitors may be conflicted, between their duties to their client and their self-interest in securing future designations by sponsor firms. Simon Salzedo KC and Tom Wood consider the extent to which designation may give rise to claims of a breach of existing English conflicts law and professional rules.
19 March 2024Security reinstatement provisions: worth the paper they are written on?
When I first agreed to pen this article, one of my esteemed colleagues remarked that he was surprised I had agreed to take this on. And when the Editor asked me a very straightforward question – “do security reinstatement provisions work?” – and I responded by saying “honestly, I have no idea”, the omens were not encouraging. Undeterred I enlisted the support of some colleagues at home base. The outcome of our collective efforts follows.
19 March 2024Repos used in LDI should be seen as either loans or derivatives, but not neither!
Defined benefit pension funds, having leveraged billions of pounds of their gilt positions using repos, were exposed to a fall in prices. This occurred in September 2022 and large losses were sustained. It is not permissible for pension funds to leverage their assets using loans or derivatives (other than for narrow specific purposes). The question then arises of whether repos are loans or derivatives, or something entirely different. Who bears the losses may well be dependent on the answer. The author’s conclusion is that repos are properly either loans or derivatives.
19 March 2024Decrypting conflict of laws
In this article Sophia Hurst considers the various options open to the Law Commission on the issue of conflict of laws for cryptocurrency disputes in advance of its consultation paper to be published in the second half of 2023.
19 March 2024Security interests in insolvency: UNCITRAL instruments and Greek law compared
This article compares the treatment of security interests in insolvency under the UNCITRAL Legislative Guide on Insolvency Law (Insolvency Guide or IG) and the UNCITRAL Legislative Guide on Secured Transactions (Secured Transactions Guide or STG) with the treatment of security interests in insolvency under Greek insolvency law. It briefly discusses the key objectives of these regimes, the insolvency estate and the impact of stays on individual actions, the effectiveness and priority of security interests, the use and sale of encumbered assets, the treatment of contracts, and the treatment of security interests in reorganisation and post-commencement finance. As an introductory remark, Greek insolvency law was recently reformed, although it retained much of the previous law. Its basis nowadays is Law 4738/2020 (Insolvency Code or IC), which regulates three (insolvency and pre-insolvency) procedures: These are: (i) the liquidation of the debtor’s estate and distribution of the proceeds to creditors; (ii) restructuring, which may bind all creditors by means of judicial confirmation of the restructuring agreement; and (iii) out-of-court workout, which applies to public law and financial creditors only, and is not court-supervised, given the apparent lack of need for protection of these powerful creditors.1
19 March 2024Pension scheme’s liability driven investment strategies: what went wrong? A lawyer’s guide
This article explains liability driven investments (LDIs), identifies features of the statutory and regulatory framework applicable to investment by Pension Schemes, and examines what went wrong in the recent market turmoil.
19 March 2024LMA Defaulting Lender provisions in today’s growing non-bank loan market
In this article the authors consider the relevance of the Loan Market Association’s (LMA) Defaulting Lender concept in non-traditional facilities such as those arranged by private credit funds and non-bank Lenders.
19 March 2024Smart contracts and the limits of the “rule of code”
This article considers a key potential value proposition of smart contracts, namely the elimination of performance risk, and the trade-offs required in order to fully realise that potential. On the other hand, it considers the limits of any attempt to utilise smart contracts to oust the applicability of the law and legal systems.
19 March 2024What’s at stake? The legal treatment of staking
Since 15 September 2022, the majority in number and value of blockchain systems are secured by proof-of-stake consensus mechanisms. Yet the legal treatment of staking has received little attention. Further confusion is caused by the fact that the use of the word “staking” has generally focussed on the existence of a return, rather than consideration of how that return is generated. For this reason, the term “staking” is now used to refer to a range of materially different activities, from staking for the purposes of validating a blockchain protocol (the primary focus of this article) to staking referring to DeFi lending and staking as used as a rewards system in NFT markets or online games. This article considers the features of different staking arrangements, describes some of the potential legal consequences of those arrangements and identifies issues that might arise as proof-of-stake consensus mechanisms evolve. The article suggests that validator staking within proof-of-stake systems is a very different type of arrangement, with a very different risk profile, to the provision of other staking models, even if colloquially or economically they are seen as “equivalent”, as both arrangements generate a return and involve locking up tokens.
19 March 2024
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