Global law firm Reed Smith advised Wilmington Trust and Eurosail-UK 2007-5NP plc in the extensive restructuring of the £662 million residential mortgaged-backed securitisation (“RMBS”) originally arranged by Lehman Brothers.
This transaction, which is one of the “Eurosail” series, is the second UK Lehman RMBS deal to be effectively restructured to resolve the “broken swap” issues since Lehman Brothers’ bankruptcy in 2008 but the first to have required bondholder meetings to vote on the proposals – which were held on 26 November. The restructuring proposals are similar to those successfully implemented in August in respect of Mortgage Funding 2008-1 plc on which Reed Smith also advised. A $170 million claim against Lehman Brothers in relation to the currency swap in the transaction was sold to provide the funds to implement the restructuring.
Some key and innovative features include the redenomination of securities from Euro to Sterling to eliminate any cross-currency risk and a write-down of the overall debt to match the issuer’s assets. The transaction also replaced the somewhat controversial post enforcement call option with limited recourse provisions following the recent Supreme Court ruling in BNY Corporate Trustee Services Ltd v Eurosail UK 2007-3BL and others (on which the team at Reed Smith also advised).
Tamara Box, partner and head of structured finance at Reed Smith, commented:
“As forecast in August, the Mortgage Funding 2008-1 plc transaction has proven to be an effective precedent for other “Eurosail” transactions and it is encouraging to see it work so successfully for a transaction which required bondholder approval in publicly-announced meetings.”
Tamara Box led the Reed Smith team which included associates James Fisher, Simon Hugo, Sarah Caldwell and trainee Imogen Holmgren (from the London structured finance team), partners Andrea Pincus (New York) and Lal Mack (New York) provided US insolvency and regulatory advice, and partners Caspar Fox, Harriet Morgan (both London) and Angelo Ciavarella (New York) provided tax advice.
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Note to Editors:
About other advisors on the matter
Wilmington Trust and Eurosail-UK 2007-5NP plc were also advised by Tods Murray on Scots law and Tughans on Northern Irish law matters. The noteholders were advised by Clifford Chance on English and New York law. Allen & Overy advised BNY Mellon as trustee. Latham & Watkins advised Danske Bank in its capacity as account bank. Acenden as Cash/Bond Administrator was advised by Clifford Chance.
About Reed Smith
Reed Smith is a global relationship law firm, with more than 1,800 lawyers in 25 offices throughout Europe, the Middle East, Asia and the United States.
For further information, please visit www.reedsmith.com or contact Annabelle Price (Branding & Communications Executive EME) on +44 (0)20 3116 3787.