• Bankruptcy Update: Repos & Safe Harbor
  • March 21, 2013 | Authors: Jonathan T. Edwards; Karen Gelernt; David A. Wender
  • Law Firms: Alston & Bird LLP - Atlanta Office ; Alston & Bird LLP - New York Office ; Alston & Bird LLP - Atlanta Office
  • Few courts have construed the meaning of “repurchase agreement” as used in the Bankruptcy Code, so the recent HomeBanc case out of the United States Bankruptcy Court for the District of Delaware is a must-read for “repo” counterparties. The principal issue in HomeBanc was whether several zero purchase price repo transactions under the parties’ contract for the sale and repurchase of mortgage-backed securities fell within the definition of a “repurchase agreement” in Section 101(47) of the Bankruptcy Code. The Homebanc court also weighed in on (i) whether Article 9 of the Uniform Commercial Code’s “commercial reasonableness” standard applies to repo participants’ disposition of securities and (ii) the appropriate valuation method to use in valuing securities when the market is dysfunctional.