Akin Gump Authors Pen Article for Law360 on NY Supreme Court Ruling on Standing for Notes’ Assignee
Law360 has published “NY Court Limits Rights Of Assignees, Indenture Trustees,” an article by Akin Gump litigation partner David Zensky, financial restructuring partner Lisa Beckerman, corporate partner Alan Laves and litigation associate Matthew Evans.
The article, which was originally issued by Akin Gump as a client alert, discusses the decision by New York’s Supreme Court in the case Cortlandt St. Recovery Corp. v Hellas Telecommunications SARL. As the authors note, the court “ruled on two important issues related to the right to sue for recovery with respect to notes issued under indentures.”
First, the court held that “assignments of a right of collection, but not title to the claims or the note itself, are insufficient as a matter of New York law to confer standing upon an assignee to sue for recovery on a defaulted note.” The second holding, note the authors, is that “common indenture provisions do not authorize an indenture trustee to pursue the noteholders’ collective fraudulent conveyance claims unless authorized by the registered holders of notes.”
Among the “concerning” implications of this decision, write the authors, is that “denying standing to enforce an indenture to beneficial owners of notes…will force noteholders to either become ‘holders’ of definitive notes, enforce their notes through DTC, or rely on the indenture trustee for enforcement, all of which may result in delays and loss of value.”
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