'Ready To Pull The (Downgrade) Trigger Again?' Court Of Appeal Reverses Napier Decision

In May this year, we circulated an alerter on the English High Court decision Napier Park v Harbourmaster1 as to the proper construction of a ratings trigger in a CLO's reinvestment criteria. In particular, while we noted the relative clarity of the CLO's ratings trigger when compared to other provisions that we have seen, we concluded that the case demonstrates the need for particular care in drafting in this context. In an interesting reversal, the English Court of Appeal has overturned the judgment of the High Court.2

The original decision

The facts are set out in our original alerter. Put simply, the case centred on the meaning of the words "the ratings of the Class A1 Notes have not been downgraded below their Initial Ratings" in the reinvestment criteria and, in particular, whether the reinvestment criteria could ever be satisfied if the Class A1 Notes had been downgraded, even if the Class A1 Notes were subsequently upgraded to their...