Lessons from Elektrim on trustee responsibilities

April 01, 2005

Three recent English law cases involving trustee The Law Debenture Trust Corporation and investor Concord Trust have scrutinized the responsibilities and liabilities of trustees. Questions about how far trustees should go to protect bondholder interests, as well as potential liability in an event of default raise fundamental questions not only for trustees, but also for investors, arrangers and issuers.

The litigation, called variously Concord, Elektrim or Law Debenture, saw the parties involved go to Court in London three times. The cases relate to €510 million ($671 million) 2% bonds due 2005 issued by Elektrim Finance, guaranteed by Elektrim and constituted by a trust deed dated November 15 2002.

Condition 10(d) of the deed includes a provision that 25% of the bondholders acting together are entitled to appoint a director to Elektrim's board. The balance of the Elektrim board in certain circumstances can reject this bondholder-appointed director. As usual, failure by the issuer or Elektrim...



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