BLP

The recent landmark case Assenagon , in 2012, subverted its long-dated precedents – namely Katz v. Oak Industries – by holding that exit consent mechanisms, which enable the issuer to incentivize existing bondholders to negatively amend their old bonds in exchange for newly issued ones, constitute «a coercive threat that the issuer invites the majority to levy against the minority…». Justice Briggs, thence, held that both the abuse of majority power and the oppression of minority «are at the essence of exit consents of this kind…» where the old bonds are substantially destroyed. However, by arguing this, Assenagon seems to have overruled Katz , which ultimately characterized exit consents as lawful measures, on the assumption that directors do not owe fiduciary duties to bondholders, and thence are entitled to propose also amendments that substantially hamper the existing bonds. On such a scenario, where the international legal literature is still enquiring on the effective meaning of Assenagon and on its relationship with Katz , this paper attempts to provide a totally different and innovative approach by analysing the facts from an opposite perspective. None, among scholars or judges, has in fact observed that the scenario introduced in Assenagon , that is to say the application of the concept of abuse of majority power to bondholders’ relationships, is ictu oculi not so obvious. Such notion, thus, was ab origine judicially crafted having in mind the shareholders’ class, whose underlying legal framework is entirely different than the bondholders’ one. If the former are in fact governed by a collective contract, contra the latters hold individual rights documented by a unique synallagmatic loan agreement – the indenture – between them all and the issuer. Their class – that is the bondholders’ meeting – has statutorily origins hence. This paper arguments that such divergences impair – if not entirely impede – any attempt by judges or scholars to analogically transplant the notion of abuse of majority power to the bondholders’ relationship. Hence, this would revolutionize the way through which Assenagon has been seen until now.