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The Bankruptcy Code provides a number of “safe harbors” for forward contracts and other derivatives. These provisions exempt derivatives from a number of Bankruptcy Code provisions, including portions of the automatic stay,1 restrictions on terminating executory contracts,2 and the method for calculating rejection damages.3 The safe harbor provisions also protect counterparties to certain types of contracts from the avoidance actions created under Chapter 5 of the Bankruptcy Code, such as the preference and fraudulent transfer statutes.4

The Issue

The issue is whether the insolvency of a borrower under a non-recourse loan can trigger recourse liability for itself and its “bad boy,” non-recourse carve-out guarantors.

The Issue  

The issue is whether the insolvency of a borrower under a non-recourse loan can trigger recourse liability for itself and its “bad boy,” non-recourse carve-out guarantors.