Napier Park European Credit Opportunities Fund Ltd v Harbourmaster Pro-Rate CLO 2 BV and others

Contract – Construction of contract. The claimant applied for a declaration as to the meaning of a provision (the provision) concerning reinvestment criteria, as defined in a collective management agreement (CMA), which governed a collateralised loan obligation structure (the CLO). The first defendant had, under the CLO, raised €602m through the issues of 14 classes of notes (the notes). An issue arose as to whether money, representing unscheduled principal proceeds, were available for reinvestment, in circumstances where the notes had been downgraded by a ratings group in 2010 and, subsequently upgraded in 2012. The Chancery Division, dismissing the claim, held that, on its true construction, the provision was not satisfied if the senior notes had at any time been downgraded below their initial ratings. In view of a downgrade of the notes in 2010, the reinvestment criteria was incapable of being satisfied.

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