The U.S. bankruptcy claims trading market has grown in recent years, from one with a few specialized firms investing in small vendor trade claims into a multibillion dollar industry. Major investment banks and hedge funds now regularly buy and sell claims arising from a variety of transactions, including swap terminations, litigation judgments, debt issuances and rejected real estate and equipment leases. With individual claim amounts frequently in the millions (and sometimes billions) of dollars, the volume of claims bought and sold has increased significantly.

Morris Kaiser’s trustee in bankruptcy, Soberman Inc., thought it smelled a rat: while claiming to be impecunious, Kaiser appeared to be living a life of ‘some means’, which included trips to casinos in the US. Kaiser claimed he was drawing advances on the credit card of a buddy, Cecil Bergman, but the trustee suspected the whole thing was a front to shield Kaiser’s assets from his creditors.

The central question in Rubin v Eurofinance SA, [2012] UKSC 46, was whether the English courts ought to recognise the order or judgment of a foreign court to set aside transactions determined to be preferential or to have been at an undervalue, in circumstances where the defendant in the foreign proceedings was not present in the foreign jurisdiction or had not voluntarily submitted to its courts.

The BLG Monthly Update is a digest of recent developments in the law which Neil Guthrie, our National Director of Research, thinks you will find interesting or relevant – or both.

In Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, the Supreme Court of Canada was called upon to consider whether orders issued by a regulatory body with respect to environmental remediation work are “provable claims” in a proceeding commenced under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c.C-36 (the “CCAA”).

On 27 July 2012, Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) released reasons for decision in the Sino-Forest CCAA case concerning the scope and effect of the 2009 amendments to the CCAA that subordinate “equity claims” to all other claims and provide that under a CCAA plan, no payment can be made in respect of equity claims until all other claims are paid in full.

The ISDA Master Agreement¹ serves as the basis for the vast majority of overthe- counter derivatives transactions. Two fundamental principles of the ISDA Master Agreement are: (1) upon the default of one party to a swap, the nondefaulting counterparty may terminate the swap, calculate its loss and claim damages; and (2) the obligation of each party to a swap to make payments to the other is subject to the satisfaction of the conditions precedent that no default has occurred with respect to the other party.

On April 6, 2011, the Ontario Superior Court of Justice released its decision in the priority disputes between the lessors and aviation authorities resulting from the Skyservice receivership. The Court, in interpreting and applying the decisions in Canada 3000 and Zoom, raised the bar for lessors to defeat the seizure and detention rights of the aviation authorities in Canada.

According to a recent Delaware bankruptcy court decision, avoidance and disallowance risk travel with a distressed claim. This decision highlights the importance of diligence and the benefits provided by purchasing distressed debt on “distressed” documents.

The debt of a troubled company is trading in the secondary market at a significant discount because the company is highly levered and is at risk of default.

T he LBIE Client Money Judgment on the appeal from the Court of Appeal has been eagerly awaited by creditors and secondary claims trading market participants in order to give clarity to the funds available for the client money pool and to determine which clients will have the benefit of those funds.

The decision has implications for creditors of MF Global UK Limited and all clients of UK financial firms.

BACKGROUND