In the wake of recent bankruptcy filings by several prominent financial institutions, there’s a growing interest in changing standard credit documentation to address the risks of defaulting lenders and nonperforming administrative agents. Here are credit agreement provisions that financial institutions, acting as swingline lenders and letter of credit issuers, can require to protect themselves against the risk of a defaulting lender.
In a recent case,1 the Fifth Circuit emphasized its rule that a creditor's claim may be equitably subordinated to the claims of other creditors only to the extent necessary to offset the harm that the other creditors have suffered, based on specific findings and conclusions.
Background
This article was published in slightly different format in the January 2008 issue of Credit Magazine.
On March 20, 2007, the United States Supreme Court ruled in Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., case docket no. 127 S.Ct. 1199 (2007), that federal bankruptcy law does not preclude an unsecured creditor from obtaining attorney’s fees authorized by a valid prepetition contract and incurred in postpetition litigation. In reaching this decision, the Supreme Court overruled the Ninth Circuit Court of Appeal’s ruling in Fobian v. Western Farm Credit Bank (In re Fobian), 951 F.2d 1149 (9th Cir.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “BAPCPA”) created an additional category of administrative expenses
Mexicana Airlines has reported that it has filed for bankruptcy protection in Mexico and will seek to reorganize. What does this mean for aircraft lessors and other creditors of Mexicana Airlines?
The Mexican Business Reorganization Act
Not necessarily so, according to the recent rulings of Southern District of New York Bankruptcy Judge Allan Gropper in the US$27 billion General Growth Properties Chapter 11 bankruptcy—at least with respect to the issue of substantive consolidation.
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.
On June 28, 2016, Judge Chapman of the U.S. Bankruptcy Court for the Southern District of New York ruled in Lehman Brothers Special Financing Inc. v. Bank of America National Association, et al.(Adv. Proc. No. 10-03547 (Bankr. S.D.N.Y.