• Court Holds that a Bankruptcy Termination Provision that Subordinates an In-The-Money Debtor’s Right to a Distribution May Be an Unenforceable Ipso Facto Provision
  • June 17, 2011 | Authors: Dennis J. Connolly; William S. Sugden; Jason H. Watson; John C. Weitnauer; David A. Wender
  • Law Firm: Alston & Bird LLP - Atlanta Office
  • In Lehman Brothers Special Financing, Inc. v. Ballyrock ABS CDO 2007-1 Limited (In re Lehman Brothers Holdings, Inc.), Adv. P. No. 09-01032 (JMP) (Bankr. S.D.N.Y. May 12, 2011) [hereinafter “Ballyrock”], the United States Bankruptcy Court for the Southern District of New York held that a contractual provision that subordinates the priority of a termination payment owing under a credit default swap (CDS) to a debtor in bankruptcy, and which caps the amount of the termination payment, may be an unenforceable ipso facto clause under section 541(c)(1)(B).