## Facts

- Assénagon Asset Management S.A. held €17 million of subordinated floating-rate notes due 2017 issued by a bank later renamed Irish Bank Resolution Corporation Ltd.
- In October 2010 the issuer launched a restructuring exchange offer: holders could exchange the subordinated notes for new senior notes at a 0.20 exchange ratio.
- The exchange offer was paired with an “exit consent” requiring tendering holders to be automatically deemed to appoint a proxy to vote for amendments to the old notes; tendering without this voting commitment was not possible.
- The proposed amendments would allow the issuer to redeem any unexchanged notes for €0.01 per €1,000 principal, if approved by a three-fourths majority of those voting.
- About 92.03% of holders tendered; the amendments passed; the issuer redeemed the remaining notes (including Assénagon’s) for €170 total.
- Assénagon brought a Part 8 claim seeking a declaration that the amendment resolution was invalid and consequential relief.

## Issues

1. Whether the majority amendment power in the trust deed permitted amendments that effectively destroyed dissenting holders’ rights through redemption for nominal consideration.
2. Whether the majority’s use of the voting power via the exit-consent mechanism was an abuse of power because it was not exercised bona fide for the benefit of the class as a whole.
3. Whether votes connected to tendered notes should be disregarded as votes held for the benefit of the issuer.

## Decision

- The court declared the exit-consent resolution invalid.
- The court held the resulting redemption of Assénagon’s notes for a nominal amount could not stand.
- The court concluded that, on these facts, the exit-consent arrangement was oppressive and an improper use of the majority voting power.
- The court treated the “votes held for the benefit of the issuer” argument as secondary; invalidity rested principally on limits on amendment power and abuse of power.

## Legal Principles

- A contractual or trust-deed power allowing a supermajority to amend bond terms has substantive limits and cannot be used to authorize expropriation or destruction of minority rights for no, or merely nominal, consideration.
- Bondholder majorities exercising class powers must act bona fide for the benefit of the class as a whole; using voting power primarily to coerce holdouts by stripping remaining rights is an abuse of power.
- Exit consents are not unlawful per se under English law, but highly coercive forms that aim to wipe out non-tendering holders at a trivial price are vulnerable to being set aside.
- Where voting rights are effectively controlled through mechanisms tied to an issuer-led exchange (including deemed proxies), courts will scrutinize whether the voting outcome is, in substance, an issuer-driven act inconsistent with class protections.

## Conclusion

The High Court invalidated a bond restructuring exit consent that enabled redemption of non-tendering holders at a nominal price, holding that the amendment power could not be used to effect a de facto confiscation and that the majority vote was an abusive, non–class-benefiting exercise of the voting power.


Assénagon Asset Mgmt. S.A. v. Irish Bank Resol. Corp. Ltd., [2012] EWHC 2090 (Ch) (Eng.)