Simon Duncan issues a warning to parties involved in financial transactions following the Napier Park ruling
In Napier Park European Credit Opportunities Fund Ltd v Harbourmaster Pro-Rata Clo 2 BV and others [2014] EWCA Civ 984, [2014] All ER (D) 197 (Jul), Lewison LJ reaffirmed the approach adopted by the courts when asked to interpret ambiguous clauses.
The facts
Harbourmaster raised 602 million Euros through the issuance of 14 classes of notes. The notes were secured on the proceeds of an underlying portfolio of loans owned by the issuer (what is known as a collateralised loan obligation structure.) Napier Park was a junior note holder.
A dispute arose between the senior and junior note holders. The issue was whether unscheduled proceeds arising from the portfolio were available to reinvest or should be paid out to note holders. The significance was that if these were paid out, the senior note holders had priority over the junior note holders. The latter wanted the monies reinvested.
The reinvestment criteria stipulated inter alia that: “4. After the reinvestment period and until the payment date…the ratings of the Class A1 notes have not
