This article first appeared in the September 2012 issue of PLC Magazine.

The use of exit consents has been an important feature of many bond restructurings (see box “What are exit consents?”). The recent landmark decision in Assenagon Asset Management S.A. v Irish Bank Resolution Corporation Ltd (formerly Anglo Irish Bank Corporation (Anglo Irish)) casts doubt on the legality of coercive exit consents under English law ([2012] EWHC 2090).

The exchange offer -

Between 2009 and 2010, Assenagon Asset Management S.A. (Assenagon) acquired €17 million of subordinated notes due in 2017 (2017 notes) issued by Anglo Irish. In the depths of the Irish financial crisis in January 2009, Anglo Irish was nationalised. The Irish government proposed a restructuring of Anglo Irish’s subordinated debt.

Anglo Irish launched a distressed exchange offer pursuant to which the bondholders could exchange their 2017 notes for new senior notes in an exchange ratio of 0.2 per each 2017 note and an “exit consent” commitment to vote in favour of a resolution introducing an amendment that would allow Anglo Irish to redeem all outstanding subordinated notes for the nominal amount of €0.01 per €1,000 in principal amount of the 2017 notes.

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