Derivatives in Bankruptcy: Latest Lessons From Lehman

Minimizing Risks When a Counterparty Becomes Insolvent

Recent Lehman decision finds "flip clause" violates ipso facto provisions

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Tuesday, May 11, 2010

Recorded event now available

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Course Materials

This CLE course will provide bankruptcy attorneys with a solid understanding of the safe-harbor provisions of the bankruptcy code for derivatives contracts and analyze the lessons from the Lehman bankruptcy cases. The panel will outline best practices to minimize risk when a significant counterparty become insolvent.

Description

The Bankruptcy Code contains many safe harbor provisions that exempt derivatives from automatic stay, assumption and rejection of executory contracts, and the avoiding powers. Bankruptcy practitioners must have thorough knowledge of the safe-harbor rules, whether representing creditors or debtors.

The various Lehman bankruptcy cases have addressed a number of issues relating to the termination of the derivatives contracts held by Lehman counterparties. These cases set precedent or are very influential in determining how these contracts are negotiated and investments structured.

Counsel representing companies that use derivatives products must insure that their clients' trading documents meet the applicable safe-harbor definitions and contain the appropriate rights and remedies in the event of insolvency of a significant counterparty.

Listen as our authoritative panel of bankruptcy attorneys discusses the special treatment accorded derivatives contracts in bankruptcy, how to proceed with derivatives trading agreements in the wake of a bankruptcy filing, and best practices for minimizing counterparty risk.

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Outline

  1. Safe harbor provisions of bankruptcy code for derivatives
    1. Code definitions of derivatives and counterparties
    2. Safe harbor protections
    3. Limitations on safe harbor protections
  2. Reducing counterparty risk
    1. Analyze trading agreements and documentation
    2. ISDA master agreements
    3. Recent developments in the Lehman bankruptcy cases: LBHI v. Metavante; LBSF v. BNY; Perpetual Trustee v. BNY (England Court of Appeals)
  3. Legislative and regulatory developments
    1. Impact of legislative proposals on counterparty risk
    2. CFTC treatment of cleared OTC products

Benefits

The panel will review these and other key questions:

  • When does a default event under the trading documents constitute a credit event under the Bankruptcy Code?
  • How are ipso facto and bankruptcy clauses relevant to the safe-harbor protections of the Code?
  • What are the limitations on the safe-harbor rules?

Faculty

Willa Cohen Bruckner
Willa Cohen Bruckner
Partner
Alston & Bird

She concentrates on derivatives, structured products, and alternative investments and has over 35 years of experience...  |  Read More

William S. Sugden
William S. Sugden
Partner
Alston & Bird

He represents debtors, bankruptcy trustees, creditors’ committees and other fiduciaries, as well as creditors and...  |  Read More

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