INTRODUCTION
In re Homebanc Mortgage Corp.,No. 07-51740-KJC, 2013 WL 211180 (Bankr. D. Del. Jan. 18, 2013)
CASE SNAPSHOT
The Bankruptcy Court found that individual repurchase transactions having a purchase price of zero may fall within the definition of "repurchase agreement" under section 101(47) of the Bankruptcy Code provided that the master agreement governing such transactions acknowledges that each transaction constitutes consideration for every other transaction under the master agreement.
FACTUAL BACKGROUND
MF Global, one of the world's leading broker/dealer firms entered into insolvency proceedings in both the US and the UK on 31 October 2011. US entities MF Global Holdings Ltd. and MF Global Finance USA Inc. filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. Also on 31 October, the US Securities Investor Protection Corporation ("SIPC") initiated the liquidation of MF Global, Inc. a jointly registered futures commission merchant and broker-dealer, under the Securities Investor Protection Act ("SIPA").
As you may recall, the High Court ruled in December 2010, in a case brought by the administrators of 20 insolvent companies in the Lehman and Nortel groups, that the cost of complying with a financial support direction ("FSD"), issued by the Pensions Regulator after the date of the commencement of a company's administration or liquidation, would rank as an expense of the administration or liquidation.
In a recent high profile case brought by the administrators of 20 insolvent companies in the Lehman and Nortel groups, the High Court ruled that the cost of complying with a financial support direction (“FSD”) issued after the date of the commencement of a company’s administration or liquidation by the Pensions Regulator would rank as an expense of the administration or liquidation.
The U.S. Court of Appeals for the Fourth Circuit recently issued a decision that has the potential to have a major impact on how contracts that provide for physical delivery of commodities are treated under U.S. bankruptcy law.
This alert has been prompted by a recent decision of the U.S. Court of Appeals that has a potentially huge impact on the treatment under U.S. bankruptcy law of contracts that entail a physical delivery of commodities. The decision is a positive development for those that had entered into a physically settled transaction with an entity which has subsequently become subject to a U.S. bankruptcy procedure as such transactions may qualify as a "swap agreement" and therefore fall within the "safe harbor" provisions of the U.S.