On February 28, Fitch addressed questions that have arisen related to the orderly liquidation authority under the Dodd-Frank Act and the securitization safe harbor. Fitch stated that clarifications from the FDIC provide comfort that the rights of investors can be determined at the outset of a securitization and that the ratings assigned to the transaction can be de-linked from those of the sponsoring entity.

On February 16, 2011, the Third Circuit affirmed a Delaware bankruptcy court's order determining the value of mortgage loans in the context of a 2006 repurchase agreement. Buyer Calyon argued that the mortgage loan portfolio sold to it by American Home Mortgage had a market price of only $670 million, as compared to its $1.15 billion contractual repurchase price, and that American Home Mortgage was required to pay Calyon the $480 million difference under a repo agreement.

Abitibi

The Supreme Court of Canada recently ruled in the Century Servicesi case that Goods and Services Tax (“GST”) deemed trusts under the federal Excise Tax Act (“ETA”) are ineffective in proceedings under the Companies’ Creditors Arrangement Act (“CCAA”).

On December 21, ISDA announced that it sought and was granted permission to intervene in the Lehman Brothers International Europe case in order to ensure that the arguments reflecting the market's interpretation of Section 2(a)(iii) of the ISDA Master Agreement were made before the court. The court agreed with ISDA that Section 2(a)(iii) is "suspensive" in effect. ISDA Release.

On December 29, 2010, the Honorable Mariana R. Pfaelzer denied a motion by Stichting Pensioenfonds ABP ("Plaintiff") to remand its claims against Countrywide and others to state court. Judge Pfaelzer concluded that the case was sufficiently related to a bankruptcy case to confer federal jurisdiction in light of contractual indemnification obligations of a bankrupt originator, American Home Mortgage Corp., to Countrywide. The Court also concluded that there were no equitable grounds meriting remand.

One of the primary objectives of the Bankruptcy and Insolvency Act (“BIA”) is to provide the bankrupt with an opportunity to stay existing creditors and establish a financial “clean slate”. The stay imposed on existing creditors includes creditors with causes of action existing at the time the bankruptcy is initiated. As a result, bankrupts can cause a halt to any existing or potential litigation by assigning themselves into bankruptcy.

Case Comment - Re White Birch Paper Holding Co.

The purchase of an insolvent company’s assets by way of a credit bid has recently garnered attention, primarily because of the use of a credit bid in the Canwest Publishing Group restructuring. This past September the issue was again addressed under the Companies’ Creditors Arrangement Act (“CCAA”), this time by the Quebec Superior Court in the restructuring of White Birch Paper Holding Co. (“WBP”). The Court reaffirmed the acceptance of credit bids by Canadian courts.

On November 17th, Lehman Brothers Special Financing Inc. ("LBSF") and its official unsecured creditors' committee filed a joint motion to stay BNY Corporate Trustee Services Limited's ("BNY") appeal for 90 days in the "Dante" matter, pending final settlement of the dispute between LBSF and Perpetual Trustee Company Limited ("Perpetual").

On October 12, the FDIC issued a notice of proposed rulemaking for a rule clarifying how the FDIC would treat certain creditor claims under the new liquidation authority, established under the Dodd-Frank Act, for financial companies whose insolvency would pose a significant risk to the financial stability of the United States.