Derivatives Decision in Lehman Bankruptcy Case

On January 25, the U.S. Bankruptcy Court for the Southern District of New York granted summary judgment to Lehman Brothers Special Financing Inc. (LBSF) in a dispute arising out of a credit-linked note program known as Dante.  The court found that the document provisions related to the subordination of a swap counterparty’s rights to a swap early termination payment when the swap counterparty or one of its close affiliates goes into bankruptcy were unenforceable.  Orrick Client Alert.