In an important decision of the Financial List of the High Court, Mr Justice Snowden has rejected claims by the Windermere VII CMBS “Class X” noteholder that it had been underpaid interest on its notes on interest payment dates in 2015. The judgment in Hayfin Opal Luxco 3 SARL v Windermere VII CMBS plc has significant implications for other Class X note structures, and the wider financial markets.

The case raised a number of issues in relation to how the Class X interest rate should be calculated. The court rejected the Class X noteholder’s claims on all aspects. In doing so, it took a robustly pro-issuer view that the Class X interest amount should be calculated based on actual cash flows into the transaction account, rather than assumed interest entitlements under the underlying loans.

Some aspects of the court’s decision will inevitably be specific to the peculiar circumstances and precise terms of the Windermere VII structure and underlying loan documentation. But other findings will be relevant to comparable structures where the same issues are known to exist. For example, the court’s findings on the default interest issue and the question of whether the Class X interest rate applies to underpaid Class X interest amounts were both before the court in the Titan Class X cases recently tried before the High Court. The finding that underpaid interest sums are not due absent a determination by the cash manager is striking. So too is the indication that applying the Class X interest rate to underpaid Class X interest amounts may be an unenforceable penalty clause.

The court’s application of important recent Supreme Court decisions to a structured finance context is of wider significance and justifies careful consideration. This is one of the early decisions of the new Financial List division of the High Court, which was set up in October 2015. It contributes to a growing body of case law that suggests this specialist financial court is developing a specialist approach to interpreting financial agreements that is sensitive to their unique financial markets context.

A more detailed analysis of the judgment has been published on our website at:

Chris Webber is a partner in Squire Patton Boggs’ Financial Services Litigation team in London. If you would like to discuss any of the issues raised in this post please feel free to contact Chris by phone on 020 7655 1655 or by e-mail at