Why Elektrim may be welcome news for trustees
June 01, 2005
The House of Lords has ruled in the Elektrim bondholder litigation that the trustee to the deal must accelerate debt if asked to do so by bondholders, but should not be liable for the results if the acceleration is shown to be invalid. By Daniel Whitehead
The opinion of the UK's highest court of appeal in the Elektrim litigation may bring welcome clarification of the responsibility and liability of bond trustees when accelerating debt.
The case came to the UK courts because Law Debenture Trust, acting as trustee on €510 million ($643 million) of Polish telecoms company Elektrim's bonds, declined to accelerate the bonds at the request of the bondholder unless indemnified by the bondholders against potential losses if the acceleration was deemed to be invalid.
The litigation began in the High Court, which determined that an event of default that was materially prejudicial to the bondholders had occurred. Elektrim claimed that acceleration under its bonds would result in a significant loss to the company (which the High Court quantified as perhaps being in excess of €800 million). Law Debenture feared that it could be liable for this amount and, being entitled under the...
The rest of this article is available to subscribers only. Subscribe today for full access to this article.
Alternatively take a free trial, giving you access for 48 hours*.
If you are already a subscriber, please log in below to access the rest of this article.
*some articles may be excluded.