First published in The Lawyer on July 18, 2011
Western economies, many With recoveries stalling in investors and creditors are considering carefully which jurisdictions will govern their interests in the event of insolvency and what, if anything, can be done to influence the process.
Many investment funds and other vehicles, attracted by tax-neutrality and stability, are incorporated in jurisdictions such as the Cayman Islands and the British Virgin Islands, but with their managers, operations, assets and investors often dispersed globally.
DURING THE PAST YEAR, many investors in the distressed debt market have received postreorganization private equity1 either through a confirmed plan of reorganization or through participation in a rights offering. Unlike publicly traded equity, each new issuance of postreorganization equity leaves recipients, issuers, and agents potentially facing uncharted territory in terms of how the instrument is to trade and settle.
FSA has set out its standards for “key attributes” of effective resolution regimes. The standards require each jurisdiction to:
Through the years, arbitration as a mode of dispute resolution has gained prominence because it promotes party autonomy with minimal court intervention, amongst others.
Anyone with a passing knowledge of derivatives law will be aware of the controversy created by section 2(a)(iii) of the ISDA Master Agreement.1 Differing interpretations of 2(a)(iii) have emerged in litigation in London and the United States since the collapse of Lehman Brothers. The recent judgement of the Court of Appeal in London in Lomas v. JFB Firth Rixson Inc2 brings significant clarity from the English perspective. The decision upholds the interpretation of section 2(a)(iii) favoured by the derivatives market.
Under the 2000 version of the Global Master Repurchase Agreement (the "GMRA"), a standard form agreement produced by The Bond Market Association and the International Securities Market Association, an Event of Default occurs, and all outstanding transactions under the GMRA are accelerated immediately, upon:
Government bonds were long considered a safe investment that offered the potential for high returns. However, after Argentina announced in 2002 that it would no longer service its bond debt and after Greece restructured its sovereign debt in March and December 2012, the question arises as to what investors can do to avoid the significant losses of capital (up to 70% in case of Argentina and over 80% in case of Greece) which almost always accompany sovereign debt restructurings.
ISDA is pleased at how the industry infrastructure for CDS worked in the context of the Lehman default and settlement. It also pointed out the misperceptions about the role of CDS in the financial crisis.
1 Advantages to aircraft financiers
For an aircraft financier, the virtues of the Cape Town Convention and its Aircraft Equipment Protocol (together Cape Town) are that it aims to:
On Monday, the International Swaps and Derivatives Association, Inc. (ISDA) announced that it will issue a CDS auction protocol regarding the settlement of credit derivatives that reference Smurfit-Stone Consolidated Enterprise Inc. The protocol is a response to Smurfit-Stone’s recent filing for reorganization under Chapter 11 in the US Bankruptcy Court in Wilmington, Delaware.