Contractual interpretation in the context of secondary loan trading

Contractual interpretation in the context of secondary loan trading

Darragh Connell, barrister at Forum Chambers, considers the decision in GSO Credit - A Partners LP and others v Barclays Bank Plc, regarding the 2012 Loan Market Association’s standard terms for secondary loan trading.

Original news

GSO Credit - A Partners LP and others v Barclays Bank Plc and another [2016] EWHC 146 (Comm), [2016] All ER (D) 27 (Feb)

The Commercial Court ruled on the second case on the Financial List and held that, for a trade on the 2012 Loan Market Association terms in respect of a surety bonds facility: (i) the trade would, generally speaking, include the economic burden of the seller’s obligations under issued surety bonds, (ii) the ‘Purchased Assets’ were, generally speaking, ‘funded’ to the extent that money had been paid by the seller under issued surety bonds, rather than to the extent by which the facility had been drawn by the mere issue of the surety bonds.

What was the background to the case?

GSO Credit - A Partners LP and others v Barclays Bank Plc and another is another recent example of the courts grappling with contractual interpretation in the aftermath of Arnold v Britton and others [2015] UKSC 36, [2015] All ER (D) 108 (Jun). It arose in the context of secondary loan trading using standard form documentation published by the Loan Market Association (LMA) in 2012 (the LMA Standard Terms).

The background facts were that monies were lent by certain lenders to various borrowers under a senior facilities agreement (SFA) dated 19 October 2007. One of the lenders was HCC International Insurance Company Plc (HCC). The credit facilities included a surety bonds facility, and HCC was the lender under that facility. In effect, HCC agreed to issue surety bonds in favour of certain public authorities in Spain and Italy. At the material time, HCC’s maximum contingent liability under surety bonds it

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