Recently, the English High Court considered1 how to interpret a material adverse change (“MAC”) clause which is a provision that routinely appears, in various forms, in loan agreements but on which there is limited case law. The court found in this case that there had been no MAC in the financial condition of a borrower.
A recent appellate decision in the Western District of Washington prohibited hedge fund creditors from voting on a debtor’s chapter 11 plan on the basis that the funds did not qualify as “financial institutions” for purposes of the definition of “Eligible Assignee” under the applicable loan agreement.1 While this counter-intuitive result seems driven by the specific facts of that case, this decision serves as a useful reminder of the importance of carefully reviewing assignment restrictions when purchasing loans in the secondary market.