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Swap Termination and the Subordination of Termination Payments in the Lehman Bankruptcy
by Stephen R. Blacklocks
Hunton & Williams LLP - New York Office
Robert J. Hahn
Hunton & Williams LLP - Charlotte Office
Brian V. Otero
Hunton & Williams LLP - New York Office
J. R. Smith
Hunton & Williams LLP - Richmond Office
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December 29, 2009
Previously published on December 2009
Lehman Brothers Holdings Inc.’s September 15, 2008 bankruptcy was an event of default under thousands of derivatives contracts to which a Lehman entity was a party and for which Lehman Brothers Holdings was the guarantor. This default entitled the vast majority of Lehman’s counterparties to terminate these contracts, and almost all were terminated. The Lehman bankruptcy court will soon address a number of issues related to the termination of these contracts, including the enforceability of “flip clauses” subordinating amounts payable to Lehman on the termination of credit default swaps backing synthetic collateralized debt obligations (CDOs).
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The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance. |
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