On May 5, the judge overseeing the bankruptcy case of Lehman Brothers Holdings Inc issued an opinion refusing Swedbank AB's request to keep several million dollars in post-bankruptcy Lehman deposits as a setoff against pre-bankruptcy swap termination claims.
The United States District Court for the District of Delaware recently affirmed a Bankruptcy Court decision that invalidated the use by creditors of so-called “triangular”, or non-mutual, setoffs in which obligations are offset among not only the parties to a bilateral contract but also their affiliates. In re SemCrude, L.P., 2010 U.S. Dist. LEXIS 42477 (D. Del.
Judge John Koeltl in the U.S. District Court for the Southern District of New York recently denied a motion to dismiss a securities class action arising, in part, from the Lehman Brothers bankruptcy filing.
On September 21, 2010, the United States District Court for the Southern District of New York granted BNY Corporate Trustee Services Limited leave to appeal a decision of the Bankruptcy Court in the Lehman Brothers bankruptcy case.1 The Bankruptcy Court held that a key provision of certain transaction documents constituted an unenforceable ipso facto clause. The District Court granted leave to appeal the Bankruptcy Court decision even though it was interlocutory.
Pursuant to § 1104 of the United States Bankruptcy Code, the court may appoint a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. A qualified examiner, with a clearly defined mission, can drastically affect the outcome of the bankruptcy case and directly impact the return to creditors. The difference between a successful financial restructure or liquidation and an investigation yielding little value to the creditors often depends on the approach taken by the examiner and his professionals.
The Federal Deposit Insurance Corporation (FDIC) has announced that the agenda for its board meeting next Tuesday, January 18, 2011, will include discussion regarding a “Final Rule Implementing Certain Orderly Liquidation Authority Provisions of the Dodd-Frank Act.”
A recent opinion by the U.S. District Court for the Southern District of New York affirms a 2010 ruling by the Lehman Brothers bankruptcy court, which rendered certain netting and setoff provisions unenforceable in bankruptcy. The core holding – that a counterparty cannot offset pre-petition and post-petition amounts – should come as no surprise to market participants.
Bank of America N.A. v. Lehman Brothers Holdings Inc. and Lehman Brothers Special Financing Inc. 439 B.R. 811 (2010) (U.S. Bankr. Ct., S.D.N.Y.)
The New York State Attorney General settled a lawsuit against Ernst & Young related to its involvement in the financial statement preparation of Lehman Brothers Holding, Inc. The NY AG had alleged that the auditing firm had countenanced Lehman’s inclusion of certain repurchase transactions as sales and not as financings, which permitted the firm to remove “tens of billions of dollars” of securities from its balance sheet. According to the NY AG, the repo transactions—known as “Repo 105”—“served no legitimate purpose.
On May 30, 2014, hedge fund Moore Capital (Moore) brought suit against the Lehman Brothers bankruptcy estate (Lehman) in the Southern District of New York bankruptcy court, seeking a declaratory judgment that it acted properly when it terminated swap agreements and setoff termination amounts in the time between the filing of the parent company Lehman Brothers Holdings Inc. (LBHI) and the eve of bankruptcy filings weeks later of Moore’s Lehman counterparties1.