MF Global UK Limited In Special Administration
The Financial Services Authority (“FSA”) has confirmed that MF Global UK Limited (“MF Global UK”) has entered the Special Administration Regime created under the Investment Bank Special Administration Regulations 2011 (“Regulations”).1 MF Global UK is the first investment bank to enter the Special Administration Regime. The decision to apply for special administration was initiated by the board of MF Global UK.
One of the many issues which arose from the collapse of Lehman Brothers was whether “flip provisions”, which reverse a swap counterparty’s priority in the order of payment on insolvency, were invalid on the basis that they contravened the anti-deprivation principle. This is a long-established common law principle which seeks to prevent an insolvent party from arranging its affairs to frustrate the legitimate claims of creditors.
The UK Financial Services Authority (“FSA”) confirmed on 31 Oct. 2011 that MF Global UK Limited (“MF Global UK”) will be subject to the new Special Administration Regime (“SAR”).[1] This is the first time that the new regime, set out in The Investment Bank Special Administration Regulations 2011 (“SAR Regulations”)[2] has been invoked.
Background
BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL Plc & others [2011] EWCA Civ 227
The Court of Appeal has allowed companies around the country to breathe a solvent sigh of relief, as it has held that the so-called “balance sheet” test of insolvency in s123(2) Insolvency Act 1996 is intended to apply where a company has reached a “point of no return” rather than being used as a “mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company”.
The FSA has published the statement that it has provided to the court appointed examiner of Lehman Brothers Holding Inc, which is referred to in his wider report on the collapse of Lehman Brothers published on 11 March 2010.
View FSA statement to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc, 12 March 2010
On 12 March 2010, the FSA published the statement that it had provided to the court appointed examiner of Lehman Brothers Holding Inc, which is referred to in his wider report on the collapse of Lehman Brothers.
View FSA statement to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc, 12 March 2010
A new wrinkle in the Lehman Brothers bankruptcy cases emerged recently when a U.S. bankruptcy judge issued an opinion directly at odds with the decisions previously rendered by certain English courts regarding priority of payment provisions (the “Priority Provisions”) with respect to collateral under the “Dante Program.”
The Dante Program
FSA has published the statement it made to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc. It has published the statement in the public interest, although it contains information that would otherwise have been confidential. The statement explains FSA’s actions and conversations in respect of the potential purchase by Barclays of the company in September 2008.
On January 25, 2010, the U.S. Bankruptcy Judge Peck struck down a provision that used the bankruptcy of Lehman Brothers Holdings, Inc. (“LBHI”) to trigger subordination of a Lehman subsidiary’s swap claim against a securitization vehicle in the United Kingdom.1
Yesterday, the U.K. government published a report entitled "Developing effective resolution arrangements for investment banks" which sets forth, primarily in response to the September 2008 collapse of Lehman Brothers Holding, Inc. (in particular its U.K. arm, Lehman Brothers International (Europe)), the U.K.