Template:M intro repack covenant to pay: Difference between revisions

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====Separate covenants to the Trustee?====
====Separate covenants to the Trustee?====
So why have separate covenants to the trustee, if there are already covenants directly to noteholders themselves under the notes?


====Privity ====
Firstly to head off issues with contractual [[privity]]. The covenant to the trustee establishes a direct contractual relationship between the Issuer and the trustee for that main indebtedness, which there would otherwise not be one (albeit that the trustee holds this obligation on trust for the secured parties)
As described above. it establishes a direct contractual relationship between the Issuer/chargor and Trustee for the main indebtedness, which there would otherwise not be (albeit that the Trustee holds this obligation on trust for the Secured Parties)
 
====Limitation period====
Secondly, [[limitation periods]]: there are some more [[ninja|ninjery]] reasons relating to the statutory [[Limitation Act 1980|limitation]] of claims.  
There are some more ninjery reasons relating to the statutory limitation of claims.  


A [[covenant]] under the debt instrument itself is only a [[simple contract]] to which the usual six-year period in the [[Limitation Act 1980]] applies. A covenant under a security arrangement is a [[specialty]], to which a longer 12 years limitation period applies under pursuant to s 20 of the [[Limitation Act 1980]].
A [[covenant]] under the debt instrument itself is only a [[simple contract]] to which the usual six-year period in the [[Limitation Act 1980]] applies. A covenant under a security arrangement is a [[specialty]], to which a longer 12 years limitation period applies under pursuant to s 20 of the [[Limitation Act 1980]].
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You can also buy a few more days with security covenant. Per the Limitation Act, again, no action can be brought of 12 years ''from the date on which the right to receive the money accrued''.  
You can also buy a few more days with security covenant. Per the Limitation Act, again, no action can be brought of 12 years ''from the date on which the right to receive the money accrued''.  


There will generally be a due date — the scheduled maturity date, for example — and this is undoubtedly the point from which the Noteholder’s [[simple contract]][ 6-year limitation period runs, but the ninja wizardry is to buy the ''secured'' “specialty” covenant a few more precious days (you know, should 12 ''years’'' worth of days not be quite enough) by making the security covenant bite “when demanded ''on or after the due date''” — the italicised reference to the due date being there so as not to convert a term loan into a demand loan. (I know what you are thinking, and you’re right: lawyers sometimes need a slap).
There will generally be a due date — the scheduled maturity date, for example — and this is undoubtedly the point from which the noteholder’s [[simple contract]][ 6-year limitation period runs, but the ninja wizardry is to buy the ''secured'' “[[specialty]]” covenant a few more precious days (you know, should 12 ''years’'' worth of days not be quite enough) by making the security covenant bite “when demanded ''on or after the due date''” — the italicised reference to the due date being there so as not to convert a term loan into a demand loan. (I know what you are thinking, and you’re right: lawyers sometimes need a slap).
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