New Guidance from the English Courts on the Solvency of Securitisation Issuers
By Conor Downey, Charles Roberts, Karl Clowry & Diego Shin
Eurosail-UK 2007-3BL plc (the Issuer) is a residential mortgage securitisation (the Transaction) whose notes (the Notes) were initially listed on the Irish Stock Exchange in July 2007. The trustee for the Notes, BNY Corporate Trustee Services Limited (the Trustee), recently petitioned the High Court for directions on two questions relating to whether an event of default has occurred as with respect to the solvency of the Issuer. The Issuer and certain holders of the Class A3 Notes (the Class A3 Noteholders) were included as original parties to the matter. Certain holders of the Class A2 Notes (the Class A2 Noteholders) were later joined as additional parties.
On 30 July 2010, the Chancellor of the High Court delivered judgment on these two questions. The decision, for which permission to appeal to the Court of Appeal has been granted to the Issuer, the Class A2 Noteholders and the Class A3 Noteholders participating in the proceedings (together with the remaining holders of notes issued as part of the Transaction, the Noteholders), is the first time a post enforcement call option (PECO) structure has been considered by the English courts.