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...