Hayfin Opal Luxco 3 SARL & Anr v Windermere VII CMBS Plc & Ors 8/4/16

The court determined rights attached to loan notes held by the claimant and issued by the first defendant under a commercial mortgage-backed security scheme. The investment scheme involved acquiring loans secured on income-generating commercial property. The purchase of the loans was funded by the issue of notes to investors. The loans held by the issuer included a loan at a fixed rate by senior and junior lenders. The issuer entered into an interest rate swap agreement and inter-creditor agreement on that loan. The borrower defaulted on the loan and the swap agreement expired and was not renewed. The court was required to determine the meaning of “senior rate” and “junior rate” in the inter-creditor agreement; whether interest payable to the senior lender on the loan should have included default interest payable by the borrower at 1% pa; whether the capitalisation of unpaid interest on another loan reduced the Expected Available Interest Collections for calculating the class interest; and whether historic unpaid class interest triggered an obligation under the conditions of the notes to pay interest at the class rate on the underpaid amount.