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    Creativity in the courts: use of the CCAA to address asset-backed commercial paper crisis
    2008-10-31

    The Ontario Court of Appeal has approved a creative use of the Companies’ Creditors Arrangement Act (CCAA) designed to unfreeze the $32-billion Canadian market for asset-backed commercial paper (ABCP).

    As has been widely publicized, the Canadian ABCP market froze in August 2007 as a result of concerns in world credit markets arising from the US subprime mortgage crisis. After the market froze, a Pan-Canadian Investors Committee was formed to attempt to restructure it.

    Filed under:
    Canada, Ontario, Insolvency & Restructuring, Litigation, Securitization & Structured Finance, McCarthy Tétrault LLP, Bond market, Asset-backed security, Secured loan, Commercial paper, Royal Bank of Canada, Companies' Creditors Arrangement Act 1933 (Canada), Supreme Court of Canada, Court of Appeal for Ontario, Ontario Superior Court of Justice
    Location:
    Canada
    Firm:
    McCarthy Tétrault LLP
    Controversial releases acceptable in asset backed commercial paper CCAA Plan of Arrangement
    2008-09-30

    The Ontario Court of Appeal has confirmed the asset backed commercial paper CCAA Plan of Arrangement (2008 CaswellOnt 4811 (C.A.)). The reasoning of the Ontario Superior Court approving the Plan of Arrangement was reviewed in previous editions of this Newsletter.

    Filed under:
    Canada, Ontario, Capital Markets, Insolvency & Restructuring, Litigation, Dentons, Debtor, Security (finance), Fraud, Market liquidity, Swap (finance), Margin (finance), Liability (financial accounting), Maturity (finance), Liquidation, Default (finance), Credit default swap, Commercial paper, Court of Appeal for Ontario, Ontario Superior Court of Justice
    Location:
    Canada
    Firm:
    Dentons
    Court approves restructuring plan for failed asset-backed commercial paper
    2008-06-17

    On June 5 2008 the Ontario Superior Court of Justice approved a plan concerning failed assetbacked commercial paper (ABCP). The restructuring called for in the plan can therefore proceed immediately, subject to any appeals from the court approval. This update is a brief survey of the key developments in the efforts to rescue the affected Canadian market for ABCP, which broke down in August 2007.

    Breakdown of Market and the Montreal Accord

    Filed under:
    Canada, Insolvency & Restructuring, Litigation, Securitization & Structured Finance, Dentons, Retail, Fraud, Market liquidity, Subprime lending, Mortgage loan, Asset-backed security, Commercial paper, United States bankruptcy court, Ontario Superior Court of Justice
    Location:
    Canada
    Firm:
    Dentons
    Transactions at risk when entered into by a company in financial distress
    2009-05-20

    When doing business with a Luxembourg company in financial distress, the counterpart should be aware that certain transactions are at risk.

    Doing business with a bankrupt Luxembourg company

    A bankrupt Luxembourg company is automatically deprived from the administration of its assets. All transactions must be entered into by the receiver in bankruptcy acting in the name and on behalf of the bankrupt company.

    Filed under:
    Luxembourg, Insolvency & Restructuring, NautaDutilh, Bond (finance), Bankruptcy, Collateral (finance), Interest, Ex post facto law, Consideration, Debt, Due diligence, Commercial paper
    Authors:
    Thibaut Willems
    Location:
    Luxembourg
    Firm:
    NautaDutilh
    A 'settlement payment' is a settlement payment, don't settle for less!
    2011-06-30

    Enron seems like ancient history but the Second Circuit has just issued an important decision in an Enron appeal confirming that the redemption of commercial paper made through DTC is entitled to the Bankruptcy Code § 546(e) exemption for “settlement payments” and, therefore, exempt from attack as preferential transfers. The Second Circuit held that this is so even though the Enron redemption payments were made prior to stated maturity, becoming the first Circuit Court of Appeal to address this issue. Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Bracewell LLP, Bankruptcy, Security (finance), Fraud, Safe harbor (law), Market liquidity, Federal Reporter, Debt, Maturity (finance), Preferred stock, Beneficial interest, Commercial paper, Enron, Investment Company Act 1940 (USA), Second Circuit, United States bankruptcy court
    Location:
    USA
    Firm:
    Bracewell LLP
    Second Circuit holds Bankruptcy Code safe harbor insulates sellers of Enron commercial paper from preference and fraudulent transfer liability
    2011-06-29

    The U.S. Court of Appeals, in a 2-1 decision on June 28, 2011, held that Bankruptcy Code § 546(e), which exempts a “Settlement Payment” from a bankruptcy trustee’s avoiding powers, insulated two sellers of Enron Corporation’s commercial paper from suit despite Enron’s early pre- bankruptcy redemption. Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., ___F.3d ___, 2011 WL 2536101 (2d Cir. June 28, 2011) (2-1).

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Clearing (finance), Unsecured debt, Security (finance), Safe harbor (law), Debt, Maturity (finance), Commercial paper, ING Group, Enron, Title 11 of the US Code, Second Circuit, United States bankruptcy court
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    A safe harbor for trustees and bondholders: using section 546(e) to protect trustees and bondholders from avoidance actions
    2013-10-12

    Section 546(e) of the Bankruptcy Code offers a strong defense for holders of bonds, notes and other securities to preference and fraudulent transfer actions brought in bankruptcy proceedings. Essentially, any payment made to settle or complete a securities transaction, including repurchases and redemptions of bonds, notes and debentures, is protected from avoidance under the Bankruptcy Code. For many years, however, this powerful defense was rarely used. When the defense was raised, it was usually in the context of protecting payments made in leveraged buy-outs.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Faegre Drinker Biddle & Reath LLP, Bond (finance), Bankruptcy, Security (finance), Commodity broker, Liquidation, Debenture, Commercial paper
    Authors:
    Andrew E. Weissman
    Location:
    USA
    Firm:
    Faegre Drinker Biddle & Reath LLP
    Quebecor decision: capital markets transactions protected in bankruptcy safe harbor
    2013-07-18

    Second Circuit’s Quebecor bankruptcy decision offers comfort to capital markets participants that certain transactions will qualify for the Section 546(e) safe harbor.

    Filed under:
    USA, Capital Markets, Insolvency & Restructuring, Litigation, Latham & Watkins LLP, Bankruptcy, Debtor, Security (finance), Commercial paper, Enron, Second Circuit
    Authors:
    Robert A. Klyman
    Location:
    USA
    Firm:
    Latham & Watkins LLP
    Second Circuit denies Enron’s petition for rehearing on commercial paper settlement payment decision
    2011-12-06

    The U.S. Court of Appeals for the Second Circuit, on Dec. 2, 2011, ruled in favor of SRZ client Alfa, S.A.B. de C.V., denying Enron’s petition for rehearing in Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir. 2011). The court had previously ruled against Enron more than five months ago, holding that its redemptions of commercial paper were “settlement payments” and thus not voidable as preferential or fraudulent transfers under Bankruptcy Code § 546(e), one of the code’s so-called “safe harbor” provisions.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Commercial paper, Enron, Second Circuit, US District Court for the Southern District of New York
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Enron’s prematurity redemptions of commercial paper are not avoidable in bankruptcy
    2011-09-13

    The U.S. Court of Appeals for the Second Circuit recently held that prematurity redemptions of commercial paper made by Enron Corp. shortly before it filed for bankruptcy were protected from avoidance by 11 U.S.C. § 546(e)’s safe harbor for securities transaction settlement payments. In re Enron Creditors Recovery Corp. v. Alfa., No. 09-5122-bk (2d Cir. June 28, 2011). In so doing, the Second Circuit resolved a clash between the Bankruptcy Code’s interest in avoiding preferential debt repayment and the securities industry’s interest in preserving transaction finality.

    Filed under:
    USA, Capital Markets, Insolvency & Restructuring, Litigation, Chadbourne & Parke LLP, Bankruptcy, Security (finance), Safe harbor (law), Debt, Maturity (finance), Fair market value, Broker-dealer, Line of credit, Accrued interest, Coercion, Commercial paper, Enron, US Code, Second Circuit, United States bankruptcy court
    Authors:
    Scott S. Balber , Marcelo M. Blackburn
    Location:
    USA
    Firm:
    Chadbourne & Parke LLP

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