To demonstrate the operation of a cascading payment system, we assume that a company has taken out loans from three creditors, creditors A, B and creditors C. The system is structured so that creditors A are the highest creditors, while creditors C are the lowest creditors. The regulation of what the company owes to each creditor is as follows: the concept of waterfall can also be used in the personal financial world. The idea is that a person should first pay off the most expensive debts. This example has been simplified to show the mechanics of a waterfall payment scheme. In fact, some cascade systems are structured so that minimum interest payments are made at all levels during each payment cycle. After entering into various guarantee agreements to manage its swap commitment, BLB attempted to argue that “pause cost coverage” at 9.7 a) would include its costs and costs of restructuring or redirecting these swap agreements in the event of early termination of borrowers` guarantee contracts. BLB also submitted that, because of the penultimate sentence of item 9.7, the reimbursement of these expenses and expenses would exceed the principal and interest earned to lenders under the facility agreement. The rules on stunts can often be contentious issues for unions, especially in situations where a default has occurred and the credit transaction involves guarantee agreements.
This case reminds us, even before the early termination, that it is important to clearly approve and document where the payments are linked to such coverage agreements in the event of payment water. While in recent years the English court has moved away from a literal interpretation towards a more contextual or targeted approach to contract writing, the parties should know that the starting point of construction will probably still be the literal approach. The recent decision of the Supreme Court of the Landesbank Hessen-Theringen Girozentrale, in particular against the Bayerische Landesbank London Branch, is a useful reminder of the need to be careful in the development of loan contracts in which a party must play several roles and to clearly state where each creditor should be registered in the case of payment water. Imagine a waterfall that fits into vertically oriented buckets. Water is synonymous with money and buckets are creditors. The water first fills the first bucket. The second bucket is only filled after the first bucket is complete. When water flows, more buckets are filled in the order in which they appear. Waterfall payment structures require high-level creditors to receive interest and capital payments, while less creditor companies receive capital payments after full repayment of senior creditors.
Debtors generally structure these plans in such tranches to prioritize the highest loans first, as they are probably also the most expensive. Imagine the money generated by a company as a cascade that ranges from executive lenders to subordinated lenders. Rainfall payment is a repayment system in which priority lenders first receive interest and capital payments from a borrower and subordinate lenders receive capital and interest payments. A cascading scheme can be put in place when a borrower is in trouble. For example, the lender could enter into an agreement whereby the borrower`s entire income can be used to pay interest and possibly a portion of the principal up to a limit and that the borrower has only the remaining income. Section 9.7, point a), of the water-of-payment case, was intended to give priority to the reimbursement of expenses, fees and expenses incurred by the representative of the facility in the exercise of this role of lender representative. It was economically wise for the representative of the facility to recover these expenses, fees and expenses as a priority for the lenders, without subsidizing them, since he was acting as a representative of the lenders, and they had committed to compensate them