Yieldpoint Stable Value Fund, LP vs Kimura Commodity Trade Finance Fund Limited

This case concerned the interpretation of a participation agreement between Yieldpoint Stable Value Fund, LP and Kimura Commodity Trade Finance Fund Limited, focusing on whether the agreement constituted a fixed-term loan or a sub-participation in a trade finance facility.

TLDR:

• Yieldpoint claimed the agreement was a fixed-term loan repayable by Kimura.
• Kimura contended it was a sub-participation with no direct repayment obligation.
• The High Court ruled in favor of Yieldpoint, but Kimura appealed.
• The Court of Appeal overturned the High Court's decision, siding with Kimura.

On 30 March 2021, Yieldpoint agreed to pay US$5m to Kimura to participate in Kimura's 50% share of an existing loan facility extended to Minera Tre Valles SPA (MTV), a mining company in Chile. Yieldpoint was to receive interest quarterly and a pro-rata share of Kimura's monthly price participation entitlement under the facility.

The agreement, known as the MTV Participation, was governed by a Master Participation Agreement (MPA) made between Kimura and Yieldpoint on 19 February 2021. The MPA anticipated that Yieldpoint would be a sub-participant in Kimura's trade-finance transactions, exposing its capital investment to the risk of default by Kimura's counterparty in the participated transaction.

The issue at trial was whether the MTV Participation was a fixed-term loan or a sub-participation. Yieldpoint contended it was a fixed-term loan repayable by Kimura on the maturity date, regardless of any default by MTV. Kimura argued that it was a sub-participation, with Yieldpoint assuming the risk of MTV's default.

MTV defaulted on its obligations by 31 March 2022, leading Yieldpoint to commence proceedings claiming repayment of the principal sum and unpaid interest. The High Court ruled in favor of Yieldpoint, interpreting the MTV Participation as a fixed-term loan.

Kimura appealed, arguing that the High Court's interpretation was incorrect and that the MTV Participation was a sub-participation. The Court of Appeal agreed with Kimura, emphasizing that the agreement's terms indicated a sub-participation structure.

The Court of Appeal highlighted that the MPA provided for a non-recourse structure, with Yieldpoint sharing in both the risks and rewards of the underlying transaction. The inclusion of a maturity date did not alter the fundamental nature of the agreement as a sub-participation.

The Court of Appeal concluded that Yieldpoint was not entitled to repayment of the US$5m, as the MTV Participation was a sub-participation and not a fixed-term loan. The appeal was allowed, and the High Court's judgment was overturned.

Legal representatives: Ben Valentin KC and Nathan Searle (instructed by Hogan Lovells International Llp LLP) for the Appellant/Defendant, Fionn Pilbrow KC and Danielle Carrington (instructed by Katten Muchin Rosenman UK LLP) for the Respondent/Claimant.

Judicial Panel: Lord Justice Phillips, Lady Justice Andrews, and Lady Justice Falk.

Case Citation Reference: [2024] EWCA Civ 639