ture coupled with releasing existing debt which was swapped with new, lower value debt. The claimant was the agent and security agent, and the second and third defendants were both senior lenders and first and second lien debt holders respectively.
In clause 11 of the senior facilities agreement, all proceeds from disposals, flotations, insurance, US tax payments and 75% of excess cash flow for any financial year had to be prepaid in a stipulated payment order. The consent of lenders holding 662/3 of the loan was required to amend or waive a finance document term and all lenders were required to amend the order of priority or subordination under the intercreditor agreement.
Anticipating breaches to the financial covenants, Truvo negotiated a limitation of the lenders enforcement rights with some lenders and requested the facility agent acting for the majority lenders to consent thereto. The amendment reversed the mandatory proceeds payment order, allegedly to the detriment of the second lien holders.
The court held that generally, the terms priority and subordination were used to rank payment among creditors where there was a shortfall in the debtor’s assets required to meet