If a court was to rule that BBIPL must pay out the banks before the noteholders, when BBIPL remains solvent. this would set a dangerous legal precedent. That precedent would allow a company to issue subordinate notes with a clear guarantee and NEVER pay back the noteholders. All a company would need to do is to always arrange to have a senior creditor who demands that subordinate noteholders can't be paid until the senior debt is repaid. When the senior debt is almost repaid... just restructure the senior debt or take out a new wad of senior debt with the same "screw the noteholder" clause. I can't see this as being allowed to continue as acceptable practice.
BNB
babcock & brown limited
