The Finance Brief - 22 January 2012
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Happy New Year and welcome to the first edition of 2013 of The Finance Brief.
In keeping with the new start to the year, we have renewed and updated our Guide to Yacht Finance. This guide will shortly be available in Russian, which we hope will be of use to those of our readers that have Russian speaking clients. We have also produced a new briefing paper entitled "Recovering Money from a Russian Guarantor" which you will find below.
Following the decision in the recent case of Re Lehman Brothers International (Europe) (in administration) [2012] EWHC 2997 (Ch), in which Field Fisher Waterhouse LLP acted for Lehman Brothers Finance, we report back on the issues involved in taking security over financial collateral.
We also consider the best practice points arising from two other recent cases: (i) National Merchant Buying Society Ltd v Bellamy and another [2012] EWHC 2563 (Ch), concerning "all monies" guarantees and (ii) Bexhill (UK) Ltd v Razzaq [2012] EWCA Civ 1376, concerning whether a borrower is able to sue for book debts once such book debts have been assigned on to a lender. Finally, we look at the potential liability for a lender when taking security over an asset.
Elsewhere, Oliver Abel Smith recently attended the annual Marketforce and IEA 10th "The Future of Private Banking" Conference and he reports back to us on the key theme of the day: change.
Hannah Salton, Editor
A Guide to Yacht Finance
In this briefing paper we provide a detailed guide for lenders, and borrowers, as to the various issues to consider when a lender is providing financing for the acquisition or re-financing of a yacht. We cover the various structural issues which must be taken into account when financing either a newbuild or an existing yacht and consider the different security documents and other ancillary documents which a lender would usually require from a borrower in connection with such financing.
A Guide to Recovering Money from a Russian Personal Guarantor
When examining the credit risk associated with taking a guarantee or other security from a Russian Personal Guarantor, lenders need to consider the possibility of default, how best to protect their position and what issues should be taken into account when considering enforcing foreign (non-Russian) judgments and arbitral awards against the Guarantor in Russia. The difficulties of enforcing foreign judgments in the Russian Federation are well known and are a cause of great concern to both lenders and foreign investors seeking to do business in Russia or with Russian entities or individuals.
The purpose of this guide is to provide an overview of the current law relating to the enforcement of foreign courts' judgments and arbitral awards in Russian courts and to outline some practical solutions and considerations for lenders seeking to commence enforcement proceedings in Russia.
Marketforce and IEA 10th "The Future of Private Banking" Conference, October 2012
The key theme emerging from, and running through, many of the discussions at the Marketforce and IEA 10th "The Future of Private Banking" conference held in October 2012 is change. In particular, that there are many challenges facing the private banking industry which are key drivers for change. These include: (i) The changing demographics of clients at both ends of the spectrum, with increased longevity but also increased wealth creation at a younger age and the very different needs of these clients. (ii) Markets are more complex with ever increasing global relationships and pressure from low returns. (iii) There is also fierce competition with new entrants and established institutions seeking to build market share. (iv) Finally, increased and changing regulation, on a domestic level (including RDR and the handover of reins to the FCA) and globally, bringing expectations of better professionalism, transparency and stricter compliance.
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General liens and financial collateral
The recent case of Re Lehman Brothers International (Europe) (in administration) [2012] EWHC 2997 (Ch), in which we acted for Lehman Brothers Finance ("LBF"), has much to interest those involved in taking security over financial collateral. The court was asked to consider no less than 27 issues relating to an English law governed master custody agreement ("MCA") between different Lehman's entities, but this note only addresses those likely to be of most interest to lenders.
The key issues were the nature of the security created by the MCA made in August 2003 between Lehman Brothers International (Europe) ("LBIE") as custodian and LBF, being one of LBIE's group companies, and the application of the Financial Collateral Arrangements (No 2) Regulations 2003 (the "Regulations") to that security.
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All monies guarantees: do they do what it says on the tin?
Guarantees frequently form a key part of finance transactions, and so lenders need to take great care to be sure that they can rely on them. Because the contractual relationship between a lender and a principal debtor is likely to be varied over time, the lender will want to ensure that any guarantees it relies on will survive such variations. This area of law is as complex as it is ancient, increasing the risk that lenders fall foul of the legal requirements relating to guarantees. Helpfully, the recent case of National Merchant Buying Society Ltd v Bellamy and another [2012] EWHC 2563 (Ch) offers lenders some clarification on one of their key areas of concern.
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Suing for book debts after assignment: who can bring proceedings?
The subject of who can sue for book debts following their assignment was recently addressed by the Court of Appeal in the case of Bexhill (UK) Ltd v Razzaq [2012] EWCA Civ 1376. Specifically, the Court of Appeal considered whether (i) a particular assignment of book debts was absolute or operated by way of charge only, (ii) who could sue for recovery of book debts following an assignment of such book debts in favour of a lender and (iii) whether the lender as assignee of the book debts could authorise the borrower to bring an action for recovery of the book debts in the borrower's sole name.
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As always, we are very keen to hear your feedback on The Finance Brief – please do get in touch.