The first of three compliance deadlines for US regulations requiring resolution-related amendments to qualified financial contracts is January 1, 2019, and delaying compliance until the subsequent deadlines creates additional risk. Compliance programs may not be able to eliminate this risk due to the scope of contracts to be remediated and the staggered compliance period that looks back to the first compliance date.

This article was published in a slightly different form in the November 2016 issue of Futures & Derivatives Law by The Journal on the Law of Investment & Risk Management Products.

Introduction

One of the recent hot topics in the European restructuring market has been whether the UK Courts would sanction a scheme of arrangement in relation to a foreign company, with no previous connection to the UK whatsoever, where the sole basis for establishing jurisdiction to undertake the scheme would be amending the governing law and jurisdiction clauses of the company’s principal finance documents to English law.

On 12 December 2013, our client, Magyar Telecom B.V. (the “Company”), a Dutch holding company of the Invitel group of companies (the “Group”) and one of the leading telecommunication services providers in Hungary, completed the restructuring of its €345 million 9.5% Senior Secured Notes due 2016 (the “Notes”).

On September 15, 2009, the United States Bankruptcy Court of the Southern District of New York ordered Metavante Corporation (“Metavante”) to make payments to Lehman Brothers Special Financing Inc. (“LBSF”) under a prepetition interest rate swap agreement guaranteed by Lehman Brothers Holdings Inc. (“LBHI” and, together with LBSF, “Lehman”) after Metavante had suspended ordinary course settlement payments under the swap.1 Metavante claimed a contractual right to withhold payment under Section 2(a)(iii) of the 1992 ISDA Master Agreement as a result of Lehman’s bankruptcy.

Recent changes in Peruvian insolvency laws1 will now allow financial institutions and insurance company counterparties to close-out and net obligations under derivatives and repurchase agreements with Peruvian financial institutions or insurance companies which become subject to bankruptcy proceedings.