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Metavante v Lehman: Difference between revisions
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In which the Southern District of New York Bankruptcy Court found that poor old Metavante Corporation, a non-defaulting counterparty relying on Section 2(a)(iii) to withhold payments under live derivatives with Lehman Brothers Special Financing, Inc. ("LBSF") on the basis of a valid pending but un-triggered {{isdaprov|Event of Default}} — all standard operating procedure, so they thought — had to, um, sit or get off the pot. In short, the Court held: | |||
*that the [[safe harbor]]s in the US [[Bankruptcy Code]] only protect a [[non-defaulting party]]’s right to terminate a swap, and enforce net termination values but do not allow it to withhold performance under a swap if the swap is not terminated; | |||
*that Metavante must make all past payments due under the {{isdama}} with [[default interest]], and resume future payments, despite Metavante's contractual right under section {{isdaprov|2(a)(iii)}} to withhold them based upon LBSFs’ ongoing bankruptcy; and, | |||
*11 months after the bankruptcy filing was too late for Metavante to suddenly go “oh whoopsie” and trigger early termination. It imposed a [[sunset clause|sunset]] on a Metavante’s right to early termination following a bankruptcy even though there wasn’t one in the {{isdama}} or the [[Bankruptcy Code]] itself. | |||
Very sucky motor, as they used to say. | |||
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===Media=== | ===Media=== | ||
*[http://ftalphaville.ft.com/blog/2009/09/30/74606/lehman-metavante-and-the-isda-master-agreement/ Lehman, Metavante and the ISDA Master Agreement - FT Alphaville] | *[http://ftalphaville.ft.com/blog/2009/09/30/74606/lehman-metavante-and-the-isda-master-agreement/ Lehman, Metavante and the ISDA Master Agreement - FT Alphaville] | ||
{{2(a)(iii)}} | {{2(a)(iii)}} | ||