Credit Default Swaps in Bankruptcy Proceedings under US Law

Dr. Angeliki Mavridou

doi:10.5771/9783845283470

Summary

The presence of undisclosed CDS positions in bankruptcy proceedings has been thoroughly examined in previous research. Various economic scholars argued that the creation of silent short positions in reorganizations can impair the successful confirmation of a reorganization plan. US legislators responded with the 2011 amendments to Bankruptcy Rule 2019 imposing an obligation on groups or committees of creditors in Chapter 11 cases to disclose any short position, including CDS positions.

The question that remains open is whether the limited disclosure requirement embedded in Bankruptcy Rule 2019 suffices to safeguard the fair and equitable distribution of a debtor’s assets pursuant to the principles and provisions of bankruptcy law. The study therefore examines the legal inconsistencies that can occur from individual, undisclosed CDS positions, particularly with regard to the pari passu principle and the Chapter 11 provisions regarding the legitimate acceptance and confirmation of a reorganization plan.

Conclusively, the study reviews whether such potential inconsistencies are imminent enough to justify the introduction of an expanded disclosure obligation.

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Bibliographic data

Copyright year: 2017
Publication date: 03.12.2017
ISBN-Print: 978-3-8487-4048-2
ISBN-Online: 978-3-8452-8347-0
Publisher: Nomos, Baden-Baden
Series: Schriften zum Insolvenzrecht
Volume: 66
Language: English
Pages: 176
Product type: Book Titles

Titelei/Inhaltsverzeichnis No access Pages 1 - 12
Introduction No access Pages 13 - 16
1. 1. 1. I. The fundamental concept of derivatives, financial innovation and the distinctive feature of modern financial derivatives No access
    2. 1. 1. The absence of a clear definition No access
      2. a. Exchange traded, cleared and over-the-counter derivatives No access
        c. Categorization on the basis of associated risk types No access
      3. a. Options No access
        b. Futures and Forwards No access
        c. Swaps No access
        d. Swaptions No access
  2. 1. I. The International Swaps and Derivatives Association and its background No access
    2. II. The structure of ISDA’s documentation on unfunded credit derivatives No access
    3. III. Master agreements and associated schedules No access
    4. 1. 1. Confirmation agreements No access
      2. 2. Additional provisions agreements No access
    5. 1. 1. The 2003 ISDA Credit Derivatives Definitions No access
      2. 2. The 2009 ISDA Credit Derivatives Determinations Committees, Auction Settlement and Restructuring Supplement to the 2003 ISDA Credit Derivatives Definitions No access
      3. 3. The 2014 ISDA Credit Derivative Definitions No access
2. 1. A. A comment on the legal status of credit derivatives No access
  2. B. An introduction to derivatives regulation in the United States No access
1. 1. 1. The parties No access
    2. The reference obligation No access
    3. The reference entity No access
    4. Fixed rate payment No access
    5. Floating rate payment No access
    6. The calculation agent No access
    7. Credit events No access
    8. Settlement methods and notification requirements No access
    9. Key dates summarized No access
  2. B. The general terms of a single name credit default swap transaction under the 2003 ISDA Credit Derivatives Definitions No access
2. 1. A. Identifying the reference obligation No access
  2. 1. I. The credit event of bankruptcy No access
    2. 1. 1. Delivering a Credit Event Notice No access
      2. 2. Notice of Publicly Available Information No access
      3. 3. Notice of Physical Settlement No access
  3. 1. I. Physical Settlement Method No access
    2. 1. 1. The mechanics of cash settlement No access
      2. 2. Key dates and times of a cash settlement process No access
    3. III. Auction settlement No access
3. 1. A. Post-settlement CDS positions relevant for the purposes of the present thesis No access
  2. 1. I. Partially satisfied creditor positions No access
    2. II. Empty creditor positions No access
    3. III. Net short creditor positions No access
  3. C. Partially satisfied, empty and net short creditor positions in bankruptcy proceedings No access
4. Subfindings No access
1. 1. A. Creditors holding a personal security No access
  2. B. Creditors holding a CDS agreement No access
  3. C. Other creditor positions involving payments originating from a source other than the bankruptcy estate No access
2. 1. A. Rules applicable to creditors who have received partial or full payment by a co-obligor under Section 509 USBC No access
  2. 1. I. Rules applicable to creditors who received payment from a non-debtor general partner in a liquidation proceeding of a partnership debtor under section 508 USBC No access
    2. II. Rules applicable to creditors who received payment from a concurrent foreign reorganization proceeding under section 1532 USBC No access
  3. C. The single satisfaction rule or else the limitation to one’s full claim amount in bankruptcy No access
3. 1. A. The de facto exemption of creditors who have received payment under a CDS agreement from otherwise applicable rules as a consequence of non – disclosure No access
  2. B. Reviewing the consistency of the de facto exemption granted to CDS creditor positions with the pari passu principle No access
  3. C. Reviewing the consistency of the de facto exemption granted to CDS creditor positions with the single satisfaction rule No access
4. Subfindings No access
1. 1. A. Allowance of claims and voting rights in reorganization proceedings No access
  2. B. The effects of the de facto exemption of creditors with an undisclosed CDS position from otherwise applicable bankruptcy rules on section 1122 (a) USBC No access
  3. C. The effects on the applicability of the equal treatment requirement under section 1123 (a) (4) USBC No access
2. 1. A. Determining the state of impairment of silently satisfied claims for the purposes of Chapter 11USBC No access
  2. B. The effects on the confirmation of a reorganization plan No access
  3. C. Disclosure requirements under Bankruptcy Rule 2019 No access
3. 1. Conclusive Notes No access
4. Conclusion No access
Bibliography No access Pages 173 - 176

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