Facility agent chasing (payment) waterfall

Facility agent chasing (payment) waterfall
Banking & Finance analysis: The High Court decision in Landesbank Hessen-Thüringen Girozentrale v Bayerische Landesbank London Branch—a dispute arising out of the payment waterfall in a facility agreement—is a good reminder of the need to pay attention to the drafting of agreements in which one party plays multiple roles and of the need to think carefully about where each creditor is intended to rank in the payment waterfall.

Original news

Landesbank Hessen-Thüringen Girozentrale and others v Bayerische Landesbank, London Branch and another [2014] EWHC 1404 (Comm)

The High Court was asked to rule on the construction of a facility agreement relating to finance for the purchase of a property in the City of London. The facility agreement required the borrowers to enter into a series of hedging agreements. The court was asked to look at the payment waterfall in the facility agreement to ascertain where payments of hedging gains by the obligors ranked.

What were the facts in the case?

The claim arose out of a facility agreement in respect of a loan facility for the purchase of 30 St Mary Axe in London (better known as 'the Gherkin') by the borrowers from Swiss Re.

The parties to the facility agreement

Both the claimants, Landesbank Hessen-Thüringen Girozentrale (Landesbank) and other banks, and the defendant, Bayerische Landesbank London Branch (BLB) were lenders under the facility agreement.

The borrowers were various entities representing a joint venture between IVG Immobilien, a German real estate group and Evans Randall, a UK investment banking and private equity group.

Prior to syndication of the loan in July 2007, BLB was the only lender. BLB was also party to the facility agreement in various other capacities—namely, as arranger, as facility agent and as security agent. The terms of the facility agreement drew a clear distinction between these various different capacities in which BLB was acting.

Landesbank and the other claimant banks became lenders under the facility agreement on syndication

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.