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====Example: the flip clause in a [[synthetic CDO]]==== | ====Example: the flip clause in a [[synthetic CDO]]==== | ||
In {{casenote|Lehman Brothers Financing|BNY Corporate Trustee Services Limited}} the US Bankruptcy Court held a “flip” clause in one of [[Lehman]]’s [[synthetic CDO]]s was an unenforceable [[ipso facto clause]]. Here the [[flip clause]] that inverted the priority of creditors — ordinarily, a swap counterparty ranks ahead of noteholders in a credit linked note, which figures, since the economic point of the deal is for the noteholder to sell [[credit protection]] to the swap counterparty — so that [[CDO]] noteholders would rank | In {{casenote|Lehman Brothers Financing|BNY Corporate Trustee Services Limited}} the US Bankruptcy Court held a “flip” clause in one of [[Lehman]]’s [[synthetic CDO]]s was an unenforceable [[ipso facto clause]]. Here the [[flip clause]] that inverted the priority of creditors — ordinarily, a swap counterparty ranks ahead of noteholders in a [[credit-linked note]], which figures, since the economic point of the deal is for the noteholder to sell [[credit protection]] to the swap counterparty — so that [[CDO]] noteholders would rank ''ahead'' of the Lehman swap counterparty if Lehman defaulted under its swap with the CDO issuer. | ||
===UK: the [[anti-deprivation]] principle=== | ===UK: the [[anti-deprivation]] principle=== |