A brave new world for noteholder litigation

Author: | Published: 20 May 2016

A recent English court ruling serves important lessons for how to draft junior creditor rights regarding the miscalculation of interest due

Noteholder litigation in the context of commercial mortgage-backed securitisation (CMBS) transactions is nothing new, whether brought directly by noteholders or via the note trustee. However, there has been a recent spate of cases brought by CMBS Class X noteholders alleging miscalculation of the interest due under their notes and claiming all historical underpayments of such interest. These holders have often purchased their instruments relatively recently at distressed prices, and in many cases, the issue of construction before the court is one that had not previously been apparent to any participant in the structure. In some cases, the relevant events are also so old that a claim for breach of contract would be outside the limitation period. But this limitation period does not apply since the ultimate remedy sought is...