safe harbor

Second Circuit Rules that Payments Made to Purchase Notes are Exempt from Avoidance Under Section 546(e) of the Bankruptcy Code

On June 10, the Second Circuit Court of Appeals held in the Quebecor World (USA) Inc. bankruptcy that payments made by a company in purchasing notes issued by an affiliate constituted transfers made in connection with a securities contract.  Therefore, the payments were protected from avoidance by a “safe harbor” under section 546(e) of the Bankruptcy Code.  Orrick covered the Quebecor decision in depth in the linked client memo.  Quebecor Case.

FDIC Securitization Safe Harbor

On November 12, the FDIC approved an interim final rule extending the safe harbor of Section 360.6(b) until March 31, 2010 for securitizations and participations that will lose the sale accounting treatment required by that rule because of recent changes to GAAP (FAS 166/167). All securitizations and participations issued on or before March 31, 2010 (including securitizations by revolving trusts issued on or before March 31, 2010) will fall under the safe harbor so long as the securitizations or participations would satisfy the conditions for sale accounting treatment under GAAP as in effect prior to November 15, 2009, and would otherwise comply with existing Section 360.6. The FDIC intends to publish in December a Notice of Proposed Rulemaking to further amend Section 360.6 regarding the treatment of securitizations and participations issued after March 31, 2010 and in the interim will consult with appropriate regulators to solicit feedback on the proposal. Comments are requested within 45 days of publication of the rule in the Federal Register. FDIC Rule. FDIC Memorandum.