US clashes with UK on flip clauses
Nicholas Pettifer |
NEWS ANALYSIS - February 04, 2010
A US bankruptcy court has ruled that flip clauses are unenforceable – opposing a decision in the UK. This could lead to securitisations migrating from the US and ratings agencies revisiting existing structures.
In the decision, the United States Bankruptcy Court for the Southern District of New York favoured Lehman Brothers regarding flip clauses in collateralised debt obligations (CDOs). This goes against an earlier decision in the English Court of Appeal.
“This was unexpected. People will have to rethink the way they document things,” said Fredric Sosnick, partner at Shearman & Sterling in New York. “It will be difficult to get similar economics into a structure without having a flip at the parent filing. It’s...
The rest of this article is available to subscribers only. Subscribe today for full access to this article.
Alternatively take a free trial, giving you access for 48 hours*.
If you are already a subscriber, please log in below to access the rest of this article.
*some articles may be excluded.