The Court of Appeal has published its decision on Lehman Brothers International Europe Limited's (LBIE) position in relation to client money it held at the time it went into administration. It:
Treasury has announced the next stage of withdrawal of government support for Northern Rock. It will end its guarantee on wholesale liabilities in three months' time, earlier than planned.
Parliament made a resolution calling on the Commission to adopt draft laws before the end of the year to help manage cross-border institutional crises. The measures should provide a common minimum set of rules, encourage convergence of national resolution and insolvency laws, and ultimately establish an EU resolution and insolvency regime. Parliament wants to see more crisis management powers to supervisory authorities, probably coordinated by the new European Banking Authority (EBA) (which takes over from CEBS).
The saying goes that when the United States sneezes, Canada gets a cold. Accordingly, when the most recent economic recession hit the United States, the financial health of many Canadian companies predictably suffered.
INTRODUCTION
There has been an upturn in the frequency of trade finance workouts, restructurings and formal insolvencies. Drew Sainsbury looks at some key issues that banks face when trade finance lending passes to “bad bank”.
The bank’s decisions at every stage of a trade finance transaction are critical: at origination; when following a workout/restructuring; and once a formal insolvency process becomes a reality.
Origination
Financial guarantees often contain non-competition clauses. This is mainly to:
- increase the financier’s recoveries from its principal debtor, by stopping the guarantor from draining money from the principal debtor; and
- prevent the guarantor from obstructing a restructuring of the principal debtor’s liabilities.
A recent case suggests these clauses should expressly exclude the “rule in Cherry v. Boultbee”. Zoë Thirlwell and Alexander Hewitt explain.
Counter-indemnity rights
FSA has censured a firm in voluntary liquidation for failings in selling and promoting geared traded endowment policies. Integrity Financial Solutions provided and advised on the policies. FSA found the product information it produced was misleading, which may have led IFAs to advise customers to buy an unsuitable product. It also found the firm’s own sales arm did not record information on customers and could not evidence why the product was suitable. FSA would have recommended a £350,000 fine if the firm were not in liquidation.
InterTAN Canada Ltd (“InterTAN”) is a wholly owned subsidiary of US based Circuit City Store, Inc. (“Circuit City”), a consumer electronics retailer. In Canada, InterTAN operates retail stores under the trade name “The Source by Circuit City”. Prior to Circuit City's filing under Chapter 11 of the United States Bankruptcy Code, InterTAN was a borrower under a syndicated credit facility between Circuit City, certain U.S. affiliates, InterTAN, Bank of America NA, as agent, and certain other loan parties (the “Secured Credit Facility”).
FMLC has responded on aspects of Treasury’s consultations on resolution of investment banks. The paper’s main recommendations include: