Tranche Warfare in Debt Restructurings: Lessons Learnt from the Stabilus Case

A recent decision of the High Court , Saltri III Limited vs MD Mezzanine SA SICAR & ors, dealt with many topical financial and legal issues in the context of non-consensual restructuring. It's also a timely reminder of best practice and certain ethical points. The case provides instructive commentary on the validity of senior-led enforcement action that disenfranchises junior lenders. The case relates to the 2010 restructuring of Stabilus (a manufacturer of auto parts), which saw the security trustee take enforcement action on the instructions of the senior lenders. The result was the transfer of the business to a SPV owned by one of the senior lenders, and the release of all debt and security held by the mezzanine lenders, who got nothing.