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Unsecured loans and ascertaining cash flow insolvency
This article examines whether the funds which a debtor company from a loan provided on an unsecured basis can be taken into account in determining whether it is solvent on a cash flow basis.
19 March 2024How has the UK National Security and Investment Act impacted cross-border M&A?
This article considers the types of M&A deals that the UK government has intervened in using its powers under the National Security and Investment Act (NSIA) and the conditions that have been attached to secure approval. It further considers the global position of the UK by comparison to similar regimes that regulate foreign investment in other jurisdictions (such as CFIUS in the US) and the potential issues faced by multi-national investors needing to grapple with multiple sets of rules.
19 March 2024The suspense ends: court says certain ISDA bankruptcy defaults can be cured
In 2012 the Court of Appeal ruled that the counterparties of Lehman Brothers International (Europe) (LBIE) who had transacted under ISDA Master Agreements could suspend payment to the administrators indefinitely for so long as the Event of Default occasioned by the appointment of the administrators was continuing. As it has become ever clearer that LBIE will one day exit administration as a going concern (on a solvent basis), the administrators have maintained that the Event of Default will cease to be continuing and the holdouts will have to pay up. In one of the first cases to be heard virtually at the start of the COVID-19 pandemic, the administrators were finally able to ask the court whether implementation of their proposals for ending the administration would mean that the Event of Default was no longer continuing. This autumn the court ruled for the administrators.1 In addition to discussing the meaning of “continuing”, the judgment pays particular attention to what constitutes a Bankruptcy Event of Default under the 1992 and 2002 ISDA Master Agreements. Within the analysis, key variables were the importance to be given to factors such as the impact of an event on the counterparty’s credit risk and the permanent effect of the event on creditors’ rights. The granular analysis will be relevant to users of the ISDA Master Agreements but also to users of other contracts with similar wording such as credit derivatives.
19 March 2024The impact of Pt 26A Restructuring Plans on intercreditor dynamics
The inclusion of a “cross-class cram-down” (CCCD) feature in Pt 26A Restructuring Plans was intended to prevent creditors with little or no economic interest in a company from blocking an otherwise well supported restructuring proposal. While this objective has been largely achieved, the wider impact of CCCD is now becoming better understood, with senior secured creditors gaining more influence and operational creditors being increasingly dragged into the restructuring process. This article examines why this is happening and then explores the potential long-term consequences of such changes which could eventually result in a significant reduction in the use of Pre-Pack sales by administrators.
19 March 2024Digital securities: where are we now?
In this article Dorothy Livingston looks at the conclusions of the UK Jurisdiction Taskforce’s third statement on the English law relating to digital assets, notes its limitations and indicates the areas that require further development to place English law at the forefront of legal systems chosen for new digital systems using DLT/Blockchain.
19 March 2024Base metal traders betting on the courts to enforce their agreed trades in a disorderly market
While recognised investment exchanges sometimes halt trading or very occasionally cancel transactions, for example as a non-regulatory circuit breaker, or when trades, known as “fat finger” trades, are placed in error, it is very rare for them to suspend trading for days, or to cancel entire trading sessions. Yet, that is what happened earlier this year at the London Metal Exchange (LME). This article considers US activist hedge fund Elliott Management’s challenge of the LME’s decision to cancel trades.
19 March 2024Is it wise for UK CCPs to clear crypto derivatives?
While crypto derivatives are currently traded over the counter in the UK, Bitcoin futures have been sold in international derivatives markets. This article explores the economic incentives, legal grounds and systemic concerns over clearing crypto derivatives in the UK under the European Market Infrastructure Regulation (EMIR) as retained EU law. It concludes that clearing crypto derivatives is unwise, as systemic risk involved outweighs potential economic gains. Practitioners should experiment in de-centralised clearing to meet the market’s desire for reliable crypto derivatives products.
19 March 2024When is a third party on notice of an agent’s lack of ostensible authority?
In this article Lisa Lacob considers the test which applies to the question of when a third party is on notice of an agent’s lack of ostensible authority. This can easily arise in a financial services context where a financial intermediary or adviser has been authorised by a product provider to arrange a deal.
19 March 2024Sustainability-linked loans: how “green-washing” risk is mitigated in documentation
In this article Greg Brown considers two recent clauses that are increasingly being included in sustainability-linked loan documentation to provide lenders with protection from the risks of “green-washing”.
19 March 2024ISDA Definitions 2021: Calculation Agent now required to produce objectively reasonable result
The recent amendments to the ISDA Definitions now require the Calculation Agent to perform its functions “in good faith and using commercially reasonable procedures to produce a commercially reasonable result”. This requires an objectively reasonable result, a more restrictive requirement than under the 2006 Definition. In turn, this means that determinations of the Calculation Agent are likely to be more open to challenge than under the previous definitions, which may generate an increased number of disputes. However, the additional protection offered by the requirement of a “reasonable result” should provide additional comfort to all parties. In any event, the amendments should encourage market participants to give careful consideration to whether they are willing to specify one of the parties to the transaction as Calculation Agent.
19 March 2024
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