82,974
edits
Metavante v Lehman: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
{{cn}} | {{cn}} | ||
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. | In which the Southern District of New York Bankruptcy Court found that poor old Metavante Corporation, a [[Non-defaulting party - ISDA Provision|non-defaulting counterparty]] relying on Section {{isdaprov|2(a)(iii)}} to withhold payments under live derivatives with Lehman Brothers Special Financing, Inc. due to 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. And, by the time they heard the case, it was too late to do either. Ouch ouch ouch. | ||
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 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, | *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, | ||