Can a majority noteholder have ‘control’ over the issuer so as to preclude it from giving direction to the agent? (Citibank, NA, London Branch v Oceanwood Opportunities Master Fund and Others)

Can a majority noteholder have ‘control’ over the issuer so as to preclude it from giving direction to the agent? (Citibank, NA, London Branch v Oceanwood Opportunities Master Fund and Others)

This case considers whether a majority note holder had sufficient ‘control’ over the issuer of the loan notes, in accordance with the terms of an indenture, so as to preclude it from giving direction to the agent and trustee under an intercreditor agreement.

Citibank, NA, London Branch v Oceanwood Opportunities Master Fund and Others [2018] EWHC 448 (Ch)

What are the practical implications of this case?

The courts decision in this matter highlighted the importance of taking a commercial approach to the interpretation of provisions so as to prevent the occurrence of an absurdity.

The court had to decide whether one company had ‘control’ of another company either through its holding of a majority of issued loan notes or de facto through its overall interest in the company’s finances. The court made it clear that it did not intend to set out a prescriptive definition of the term ’control’ and emphasised that in determining whether control existed or not context was everything and the matter should be determined by the facts on a case by case basis. The definition of control was important in this instance because if the noteholder was found to have control it would be prevented from giving instructions to the agent to protect its interests.

What was the background?

A Norwegian company, Norske Skog AS (Issuer), issued senior secured notes (SSN) that were governed by an indenture that was subject to New York law (Indenture). Citibank, NA, London acted as agent and security trustee (Agent) on the transaction. Oceanwood Opportunities Master Fund (Oceanwood) came to be the majority noteholder by holding just over 51% of

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About the author:

Neil specialises in banking and asset finance transactions with a particular emphasis on shipping finance, aviation finance, renewable energy finance and in providing corporate finance transactional support. Neil qualified as a solicitor with TLT in 2004 and worked as a finance solicitor in both the Bristol and London offices before joining the asset finance team at DLA Piper.