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Lehman vs Moore in swaps safe harbour showdown
Lehman Brothers is claiming a series of inter-affiliate transfers by Moore Capital robbed it of $20 million of derivatives termination payments at the time of the bank’s collapse. The resulting test of the US bankruptcy code has profound implications for swaps
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Seven years after its bankruptcy filing, Lehman Brothers has the potential to again upend the derivatives market – this time, by weakening one of its legal cornerstones, the right to immediately net and settle trades with a defaulted counterparty, rather than waiting in line during the bankruptcy process.
Lawyers for Lehman's estate claim New York-based hedge fund Moore Capital misused this safe harbour – part of the US bankruptcy code – in 2008 to cut $20 million from the sum it owed the bank
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