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ARTICLE · 10 OCTOBER 2016

Curing Ambiguities And Defects Without Noteholder Vote: Not So Fast

Herbert Smith Freehills Kramer LLP
Herbert Smith Freehills Kramer LLP
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Herbert Smith Freehills Kramer LLP

Herbert Smith Freehills Kramer LLP

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A recent decision in New York State Appellate Court demonstrates what can go wrong when an issuer attempts to correct what it asserts to be an ambiguity or defect in an indenture without a noteholder vote.

United StatesFinance and Banking
Christopher Auguste
Christopher Auguste
David Berg
David Berg
John Bessonette
John Bessonette
Kenneth Chin
Kenneth Chin
Richard Farley
Richard Farley
David J. Fisher
David J. Fisher
Jamie Kocis
Jamie Kocis
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Mae Rogers
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Drew Allen
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A recent decision in New York State Appellate Court, GSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), demonstrates what can go wrong when an issuer attempts to correct what it asserts to be an ambiguity or defect in an indenture without a noteholder vote.

In GSO Coastline , Global A&T Electronics Ltd. (GATE) had two first lien credit facilities and two second lien credit facilities, aggregating approximately $775 million and $475 million, respectively. In February 2013, GATE issued approximately $625 million of notes (the Original Notes) pursuant to an indenture (the Indenture) and used the proceeds to prepay the first lien facilities. The Original Notes were secured by a first lien on GATE's assets.

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