Deutsche Trustee Company Ltd v Duchess VI CLO B.V. & Ors

Deutsche Trustee Company Ltd v Duchess VI CLO B.V. & Ors

The Collateral Manager is not entitled to an ICMF under clause 14.1 of the Collateral Management Agreement when an option to redeem the Class F Notes under Condition 7(b)(i)(A) is exercised. The ICMF definition only refers to payment in accordance with the Condition 3 waterfalls, not Condition 11, and the transaction documents do not provide for a new ICMF to accrue on running the Condition 11 waterfall. The SIT and CSI thresholds cannot be properly applied under Condition 11. The language of the transaction documents is clear and unambiguous in this context.

Parties
Claimant: Deutsche Trustee Company Limited; First Defendant: Duchess VI CLO B. V.; Second Defendant: Barings (U. K.) Limited; Third Defendant: Napier Park European Credit Opportunities Fund Limited
Jurisdiction
England and Wales
Judgment Date
28 March 2019
Procedural Posture
Part 8 Claim (interpretation of Transaction Documents) / Judgment After Trial of Agreed Issues
Outcome
Claim dismissed; declaration in favour of Class F Noteholders (Napier)
Legal Topics
Interpretation of Contracts, Collateralised Loan Obligations, Securitisation, Trust Deeds, Payment Waterfalls
Commercial Law Banking and Finance Interpretation of Contracts Collateralised Loan Obligations Securitisation Trust Deeds Payment Waterfalls

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Parties

Deutsche Trustee Company Limited

Claimant

Duchess VI CLO B. V.

First Defendant

Barings (U. K.) Limited

Second Defendant

Napier Park European Credit Opportunities Fund Limited

Third Defendant

Procedural Posture

Part 8 Claim (interpretation of Transaction Documents) / Judgment After Trial of Agreed Issues

Legal Issues

  1. 1 Whether the Collateral Manager is entitled to the Incentive Collateral Management Fee (ICMF) on an Optional Redemption under Condition 7(b)(i)(A)
  2. 2 Whether the ICMF is limited to amounts accrued and unpaid immediately prior to the Redemption Date
  3. 3 Whether principal payable to Class F Noteholders on the Redemption Date is excluded from the SIT calculation

Ratio Decidendi

The Collateral Manager is not entitled to an ICMF under clause 14.1 of the Collateral Management Agreement when an option to redeem the Class F Notes under Condition 7(b)(i)(A) is exercised. The ICMF definition only refers to payment in accordance with the Condition 3 waterfalls, not Condition 11, and the transaction documents do not provide for a new ICMF to accrue on running the Condition 11 waterfall. The SIT and CSI thresholds cannot be properly applied under Condition 11. The language of the transaction documents is clear and unambiguous in this context.

Court Disposition

Claim dismissed; declaration in favour of Class F Noteholders (Napier)

Orders

  • The Class F Noteholders are entitled to the Monies held by the Trustee.
  • No ICMF is payable to the Collateral Manager on Optional Redemption under Condition 7(b)(i)(A).