Deutsche Trustee Company Ltd v Duchess VI CLO B.V. & Ors [2019] EWHC 778 (Ch) (28 March 2019)

Deutsche Trustee Company Ltd v Duchess VI CLO B.V. & Ors [2019] EWHC 778 (Ch) (28 March 2019)

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 refers only to payment in accordance with Condition 3 waterfalls, not Condition 11, and the drafting does not support payment of a new ICMF on Optional Redemption. The language of the transaction documents is clear and unambiguous in this respect.

Citation
[2019] EWHC 778 (Ch)
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
CPR Part 8 Claim for Construction of Financial Instrument / High Court (chancery Division) Final Judgment
Outcome
Claim dismissed; Class F Noteholders entitled to the Monies held by the Trustee.
Legal Topics
Interpretation of Financial Instruments, Collateralised Loan Obligations, Incentive Collateral Management Fee, Optional Redemption, Payment Waterfall, Trust Deed Construction
Commercial Law Banking and Finance Law Contract Law Interpretation of Financial Instruments Collateralised Loan Obligations Incentive Collateral Management Fee Optional Redemption Payment Waterfall +1 more

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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

CPR Part 8 Claim for Construction of Financial Instrument / High Court (chancery Division) Final Judgment

Legal Issues

  1. 1 Whether the Collateral Manager is entitled to the Incentive Collateral Management Fee (ICMF) upon Optional Redemption under Condition 7(b)(i)(A)
  2. 2 Whether ICMF is limited to accrued and unpaid amounts prior to Redemption Date
  3. 3 Whether principal payable to Class F Noteholders on Redemption Date is excluded from 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 refers only to payment in accordance with Condition 3 waterfalls, not Condition 11, and the drafting does not support payment of a new ICMF on Optional Redemption. The language of the transaction documents is clear and unambiguous in this respect.

Court Disposition

Claim dismissed; Class F Noteholders entitled to the Monies held by the Trustee.

Orders

  • The Collateral Manager is not entitled to the Incentive Collateral Management Fee on Optional Redemption under Condition 7(b)(i)(A).
  • The Monies representing the ICMF are to be paid to the Class F Noteholders.