Cheyne Finance Plc, Re

Cheyne Finance Plc, Re

The definition of 'Insolvency Event' in the Common Terms Agreement and Trust Deed requires Receivers to consider Cheyne's ability to pay all Senior Debts as they fall due, including future debts, and to determine insolvency if, on the balance of probabilities, Cheyne will be unable to pay all such debts on time. The Receivers are not required to sell assets in a manner that would prefer early maturing debts at the expense of later ones if insolvency is inevitable; instead, they must act in the best interests of all Senior Creditors as a class.

Parties
Issuer: Cheyne Finance Plc (in Receivership); Senior Creditors (short Maturity): Party A; Senior Creditors (early Insolvency Event): Party B; Senior Creditor (supports Party B): Party C; Mezzanine Capital Noteholders (subordinated Debt): Party D
Jurisdiction
England and Wales
Judgment Date
17 October 2007
Procedural Posture
Receivers' Application for Directions (insolvency Context) / Judgment on Second Urgent Application for Directions
Outcome
Application allowed; directions given on construction of 'Insolvency Event' and Receivers' duties; permission to appeal granted with expedited timetable; partial stay granted to prevent asset portfolio sale pending appeal.
Legal Topics
Cash Flow Insolvency, Interpretation of 'insolvency Event', Receivers' Duties, Priority of Payments, Standard of Proof for Insolvency Determination
Insolvency Company Law Trusts Cash Flow Insolvency Interpretation of 'insolvency Event' Receivers' Duties Priority of Payments Standard of Proof for Insolvency Determination

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Parties

Cheyne Finance Plc (in Receivership)

Issuer

Party A

Senior Creditors (short Maturity)

Party B

Senior Creditors (early Insolvency Event)

Party C

Senior Creditor (supports Party B)

Party D

Mezzanine Capital Noteholders (subordinated Debt)

Procedural Posture

Receivers' Application for Directions (insolvency Context) / Judgment on Second Urgent Application for Directions

Legal Issues

  1. 1 Whether, on assumed facts, Cheyne Finance Plc is unable or about to become unable to pay its debts as they fall due to Senior Creditors within the meaning of 'Insolvency Event' in the Trust Deed and Common Terms Agreement
  2. 2 Whether Receivers are obliged to sell assets to ensure payment of Senior Debts as they fall due if no Insolvency Event has occurred
  3. 3 Whether Receivers may enter into asset sales that affect the timing or completeness of payment to Senior Creditors

Ratio Decidendi

The definition of 'Insolvency Event' in the Common Terms Agreement and Trust Deed requires Receivers to consider Cheyne's ability to pay all Senior Debts as they fall due, including future debts, and to determine insolvency if, on the balance of probabilities, Cheyne will be unable to pay all such debts on time. The Receivers are not required to sell assets in a manner that would prefer early maturing debts at the expense of later ones if insolvency is inevitable; instead, they must act in the best interests of all Senior Creditors as a class.

Court Disposition

Application allowed; directions given on construction of 'Insolvency Event' and Receivers' duties; permission to appeal granted with expedited timetable; partial stay granted to prevent asset portfolio sale pending appeal.

Orders

  • Receivers may determine an Insolvency Event if, on the balance of probabilities, Cheyne is or is about to become unable to pay all Senior Debts as they fall due, considering future debts.
  • Receivers are not obliged to sell assets solely to ensure payment of early maturing debts if insolvency is otherwise inevitable; must act in best interests of all Senior Creditors.