The high court has ruled that any proceeds from the sales of Gemini CMBS assets should be regarded as principal and not interest.
The ruling excludes junior note holders from taking payments from any sale, leaving only the Class A noteholders to collect any receipts.
The decision brings to a conclusion a long dispute over who was entitled to payments from any sale of assets from within the original £919m Gemini loan made by Barclays.
The ruling is particularly timely, coming just weeks after Varde Partners bought 24 of the original 36 assets underlying the CMBS for around £305m.
In his draft judgment, Mr Justice Henderson said that any proceeds from the sale “should be characterised as principal, because they represent the realised capital value of a property which stands as security for the loan”.
“I accept the submissions of the Class A noteholders that the consequences of treating sale proceeds and surrender premiums as principal are well in line with what the parties might reasonably be expected to have contemplated when the securitisation was put in place and the notes were sold to investors,” he said.
The judge added that there would be a “lack of symmetry” if the proceeds of a sale or surrender premiums were treated as revenue receipts and had to be used to pay interest on the notes.
