Bank creditors often take security in the form of guarantees or
mortgages given by the borrower's parent or affiliated
companies. Such creditors enjoy a privileged position
vis-à-vis unsecured creditors and there are rules to
maintain fairness between these classes of creditors when a
borrower in put into liquidation. However, as the recent case of
Re Swiber Holdings Ltd shows there was until recently some
uncertainty as to the application of such rules in the case of
judicial management. The issues were complicated by the fact that,
to some extent, the two companies under judicial management were
borrower and guarantor. How are the votes of creditors to be
counted?
1. When a defaulting borrower is put into liquidation, a bank
creditor may generally maintain a proof of debt for the full amount
of the debt, notwithstanding the existence of security from a third
party. However, what is the position where the defaulting borrower
is put under judicial management and
