Commentary

59 Comparison of recoveries according to method of subordination

BANKING vol 4(1)
BANKING vol 4(1) | Commentary

59 Comparison of recoveries according to method of subordination

BANKING vol 4(1) | Commentary

59 Comparison of recoveries according to method of subordination

If the debtor goes into insolvent liquidation, the recoveries of senior debt, junior debt and other debt vary according to the subordination arrangements.

In both examples of the contingent subordination, the ‘other debt’ benefits from the reduction of the junior debt even though the subordination was only meant to benefit the senior debt. This is so because of the pari passu dividend distribution provisions of the Insolvency Act 1986.

In both examples of the turnover subordination, the senior creditor benefits from the double dip, but the ‘other debt’ does not benefit from the

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