Enforceability of capital commitments in a subscription credit facility

Introduction

Filed under:
USA, Banking, Insolvency & Restructuring, Litigation, Securitization & Structured Finance, Mayer Brown, Collateral (finance), Limited liability company, Consent, Limited partnership, Subscription business model, Default (finance), Line of credit, Articles of partnership, Secured loan
Authors:
Michael C. Mascia , Zachary K. Barnett , Wesley A. Misson , Mark C. Dempsey
Location:
USA
Firm:
Mayer Brown
Commercial paper redemption “safe harbored” from preference liability per Second Circuit Court of Appeals

The US Court of Appeals for the Second Circuit recently held that redemptions of commercial paper made through the Depositary Trust Company (DTC) are entitled to the “safe harbor” protections afforded to settlement payments under Bankruptcy Code Section 546(e), and are, therefore, not preferential transfers, even though such payments were made prior to maturity.1 The Second Circuit is the first Circuit Court of Appeal to address the issue, which arises out of the Enron bankruptcy case.

Legal Framework

Filed under:
USA, Insolvency & Restructuring, Litigation, Mayer Brown, Bankruptcy, Security (finance), Safe harbor (law), Market liquidity, Commodity, Debt, Maturity (finance), Line of credit, Commercial paper, Enron, Title 11 of the US Code, Second Circuit, United States bankruptcy court
Authors:
Amit K. Trehan , Brian Trust
Location:
USA
Firm:
Mayer Brown