new power to the noteholders

Australian insolvency law, especially as it pertains to creditors meetings, is very interesting.

Consider the following:

5.6.24 (2) A creditor is entitled to vote only in respect of the balance, if any, due to him or her after deducting the value of his or her security as estimated by him or her in accordance with regulation 5.6.41

This means that if the banks have debt established over a security - the bank can only vote the difference between the debt and the security - the net balance.

BBSN noteholders, will be unsecured. They can vote for the full amount of their debt.

BBSN noteholders are likely to be the dominant unsecured creditor group at both the BNB and BBIPL creditors meetings.

The creditors meetings are where the BBSN holders have ABSOLUTE power.

If a secured creditor votes in respect of their whole claim - THEY LOSE THEIR SECURITY OVER THEIR DEBT. They become unsecured creditors.

Even with the BBIPL liquidation - the pain for the banks just increases. A well organised ex-BBSN noteholder group would have the power to "taunt" the banks into voting their full amount of debt to avoid some specific resolution and thereby become unsecured debtholders - the same debt priority as the ex-BBSN noteholders.

This is where the complexity of the BNB group could actually work in favour of the noteholders.

At the creditors meetings - we are King for a day ... but King none the less.

(The Banks can't even vote against an adjournment - they will lose their security).