Derivatives specialist Louise McCoach has authored the 2021 Australia chapter of the ‘International Comparative Legal Guide - Derivatives 2021’, which summarises the laws and regulations of derivatives in Australia. The chapter covers documentation and formalities, credit support, regulatory issues, insolvency/bankruptcy, close-out netting, taxation and bespoke jurisdictional matters and market trends in the Australian derivates market.
In its ruling on Wednesday 27 July in the matter of Belmont Park Investments PTY Ltd v BNY Corporate Trustee Services Lte & Anor [2011] UKSC 38 the Supreme Court of the United Kingdom has dismissed the appeal by Lehman Brothers Special Finance Inc. ("LSF") relating to the validity of an alleged anti-deprivation provision known as a 'flip' provision which, has the effect of altering the payment priority order as a result of a bankruptcy of the relevant swap counterparty, in this case Lehman Brothers.
On April 19, 2021, the U.S. Supreme Court declined to hear the appeal of a landmark 2019 decision issued by the U.S. Court of Appeals for the Second Circuit regarding the applicability of the Bankruptcy Code's safe harbor for certain securities, commodity, or forward contract payments to prevent the avoidance in bankruptcy of $8.3 billion in payments made to the shareholders of Tribune Co. as part of its 2007 leveraged buyout ("LBO").
Almost a year has now passed since the Corporate Insolvency and Governance Act 2020 (CIGA) first entered force on 26 June 2020. According to the Explanatory Notes that accompanied CIGA, “the overarching objective of [the Act] is to provide businesses with the flexibility and breathing space they need to continue trading during this difficult time”. To this end, CIGA introduces a number of permanent and temporary amendments to the UK’s insolvency landscape which are aimed at ensuring businesses can maximise their chances of survival against the backdrop of the COVID-19 pandemic.
The Colombian airline Aerovias Nacionales de Colombia S.A. – Avianca (“Avianca”) has made a habit of accessing the structured credit markets by monetizing its expected stream of credit card receivables, filing for U.S. Chapter 11 protection when in distress, and then challenging the structured credit agreements to which it had committed. Recently, Avianca reached a settlement with the lenders to its existing future flow receivables transaction, entered into in December 2017, which will result in a restructured loan facility.
Recent regulatory developments of interest to all financial institutions. Includes key COVID-19 updates from the UK FCA, AML/CTF updates and more.
COVID-19: FCA statement on handling of post and paper documents
On 13 May 2020, the Financial Conduct Authority (FCA) published a statement on how firms should handle post and paper documents during the COVID-19 pandemic.
In the light of increased volatility across many markets and disruptions to economic activity, parties to transactions that are subject to ISDA Master Agreements1 will need to think about what strategies they would adopt if an Event of Default occurs with respect to their counterparties.
Choices
The Commodity Futures Trading Commission proposed its first comprehensive overhaul of its bankruptcy rules since 1983. The recommended new rules do not substantively change anything but codify many CFTC interpretations and views developed over 40 years and refresh references to means of communication and recordkeeping practices to reflect current norms.
How does one go bankrupt? Two ways — gradually and then suddenly.
(Paraphrase of Hemmingway, by way of CFTC Chairman Heath Tarbert)