The effectiveness of the restructuring technique known as “exit consent” has been cast into doubt by the English High Court. During a recent consent solicitation, Assenagon Asset Management SA, a noteholder with a €17m holding in Anglo-Irish Bank (now IBRC) refused to vote in favour of an exchange offer that would have emanated in their holding being replaced with paper that was an eye watering 20% discount of their bonds face value. Assenagon’s reward for protecting their position was a €170 payout for their entire holding (0.00001% of face value). Unsurprisingly, litigation ensued and Assenagon were successful in obtaining a declaration that the exchange resolution was not valid.
Assenagon challenged the validity of the resolution on three fronts, the first two arguments were based on the construction of the Trust Deed whereas the third argument is significant to the market due to its general application:
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