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    National gas distributors case broadens swap safe harbor, or does it?
    2009-03-13

    On Feb. 11, 2009, the United States Court of Appeals for the Fourth Circuit issued its opinion in Hutson v. E.I. Dupont de Nemours and Co. (In re National Gas Distributors), attempting, in a matter of first impression, to define "commodity forward agreement" for purposes of eligibility for protection under the safe harbor provisions of the Bankruptcy Code. At first blush, this decision appears to provide the additional certainty that participants in the commodities markets require.

    Filed under:
    USA, Derivatives, Energy & Natural Resources, Insolvency & Restructuring, Litigation, Dentons, Bankruptcy, Fraud, Natural gas, Safe harbor (law), Swap (finance), Commodity, Remand (court procedure), Commodity market, Prima facie, US Code, United States bankruptcy court, Fourth Circuit
    Authors:
    Hugh M. McDonald
    Location:
    USA
    Firm:
    Dentons
    Commercial paper redemption “safe harbored” from preference liability per Second Circuit Court of Appeals
    2011-07-11

    The US Court of Appeals for the Second Circuit recently held that redemptions of commercial paper made through the Depositary Trust Company (DTC) are entitled to the “safe harbor” protections afforded to settlement payments under Bankruptcy Code Section 546(e), and are, therefore, not preferential transfers, even though such payments were made prior to maturity.1 The Second Circuit is the first Circuit Court of Appeal to address the issue, which arises out of the Enron bankruptcy case.

    Legal Framework

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Mayer Brown, Bankruptcy, Security (finance), Safe harbor (law), Market liquidity, Commodity, Debt, Maturity (finance), Line of credit, Commercial paper, Title 11 of the US Code, Enron, Second Circuit, United States bankruptcy court
    Authors:
    Brian Trust
    Location:
    USA
    Firm:
    Mayer Brown
    The federal law “on clearing and clearing activities” and related amendments to Russian legislation
    2011-03-18

    Background

    Until recently Russian legislation was not familiar with the concept of close-out netting. Although there was no prohibition for market participants to enter into netting agreements, Russian courts would not enforce such agreements in case of bankruptcy. This led to the use of complex structures to avoid the negative consequences of the application of Russian law and was a strong argument in favor of using foreign entities and application of foreign law to derivative transactions.

    Filed under:
    Russia, Insolvency & Restructuring, Herbert Smith Freehills LLP, Contractual term, Bankruptcy, Clearing (finance), Security (finance), Statutory interpretation, Commodity
    Location:
    Russia
    Firm:
    Herbert Smith Freehills LLP
    CFTC proposes amendments regarding the operation of a commodity broker in bankruptcy
    2010-01-04

    On December 16th, the CFTC published for comment amendments to its regulations concerning the operation of a commodity broker in bankruptcy. The amendments would permit a bankruptcy trustee to operate, with the written permission of the CFTC, the commodity broker in the ordinary course, including the purchase or sale of new commodity contracts on behalf of the customers of the commodity broker under appropriate circumstances, as determined by the Commission.

    Filed under:
    USA, Derivatives, Insolvency & Restructuring, Winston & Strawn LLP, Bankruptcy, Commodity, Commodity broker, Commodity Futures Trading Commission (USA)
    Location:
    USA
    Firm:
    Winston & Strawn LLP
    CFTC amends rule regarding operation of commodity brokers in bankruptcy
    2010-07-30

    The Commodity Futures Trading Commission has announced that it will amend its Regulation 190.04(d)(2) regarding the operation of a commodity broker in bankruptcy. Currently, a bankruptcy trustee is prohibited, immediately upon the commencement of the commodity broker’s bankruptcy case, from processing any new trades on behalf of customers of the commodity broker, with limited exceptions.

    Filed under:
    USA, Derivatives, Insolvency & Restructuring, Katten Muchin Rosenman LLP, Bankruptcy, Commodity, US Securities and Exchange Commission, Commodity Futures Trading Commission (USA), Trustee
    Location:
    USA
    Firm:
    Katten Muchin Rosenman LLP
    CFTC proposes new rules regarding operation of commodity brokers in bankruptcy
    2009-12-18

    The Commodity Futures Trading Commission is proposing to amend its Bankruptcy Rules to permit the trustee for a bankrupt futures commission merchant to continue to operate the business of the commodity broker in the ordinary course for a limited period of time.

    Filed under:
    USA, Derivatives, Insolvency & Restructuring, Katten Muchin Rosenman LLP, Bankruptcy, Commodity, Commodity broker, Consideration, Liquidation, US Securities and Exchange Commission, Commodity Futures Trading Commission (USA), Trustee
    Location:
    USA
    Firm:
    Katten Muchin Rosenman LLP
    CFTC issues statement regarding bankruptcy treatment of cleared-only contracts
    2008-10-03

    In an interpretive statement, the Commodity Futures Trading Commission has taken the position that “cleared-only contracts,” over-the-counter contracts submitted for clearing through a futures commission merchant to a derivatives clearing organization, should be included within the definition of “net equity” for purposes of U.S. Bankruptcy Code provisions applicable to commodity brokers. The CFTC’s interpretation generally would treat cleared-only contracts in the same manner as exchange-traded futures contracts in the event of a futures commission merchant bankruptcy.

    Filed under:
    USA, Derivatives, Insolvency & Restructuring, Katten Muchin Rosenman LLP, Bankruptcy, Clearing (finance), Commodity, Futures contract, Commodity broker, Title 11 of the US Code, Commodity Futures Trading Commission (USA)
    Location:
    USA
    Firm:
    Katten Muchin Rosenman LLP
    Mineral Royalties: When Do They “Run With the Land”?
    2016-11-23

    The challenging commodity price environment will likely bring renewed focus on the rights and obligations that will be impacted if insolvency overtakes exploration and production companies. The British Columbia Supreme Court’s recent decision in Re: Walter Energy Canada Holdings, Inc. is a case in point. The case dealt squarely with the question of whether a mineral royalty “runs with the land” – a question that takes on significantly greater importance in the insolvency context.

    Filed under:
    Canada, British Columbia, Energy & Natural Resources, Insolvency & Restructuring, Litigation, McCarthy Tétrault LLP, Commodity
    Authors:
    Junior Sirivar
    Location:
    Canada
    Firm:
    McCarthy Tétrault LLP
    Drafting eligible financial contracts
    2007-08-02

    All businesses know that one key to profitability is risk management. Particularly in such industries as oil and natural gas, eligible financial contracts have emerged as an invaluable tool to hedge the risk associated with volatile foreign currency exchange, interest rates and commodity prices. Indeed, a large business has developed proffering over-the-counter derivatives (or ‘swaps’) and standardized exchange-traded derivatives (or ‘futures’) to do just that.

    Filed under:
    Canada, Derivatives, Insolvency & Restructuring, Litigation, McCarthy Tétrault LLP, Natural gas, Swap (finance), Commodity, Commercial law, Prejudice, Companies' Creditors Arrangement Act 1933 (Canada), Court of Appeal of Alberta
    Location:
    Canada
    Firm:
    McCarthy Tétrault LLP
    From the Top: U.S. Supreme Court to Hear Case on Scope of Section 546(e)'s Safe Harbor
    2017-05-01

    On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. See FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (a discussion of the Seventh Circuit's ruling is available here).

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Debtor, Fraud, Federal Reporter, Commodity, Title 11 of the US Code, US Congress, US Senate, US House of Representatives, SCOTUS, Seventh Circuit, Tenth Circuit
    Authors:
    Bruce Bennett , Brad B. Erens , Dan T. Moss
    Location:
    USA
    Firm:
    Jones Day

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