On November 1, the Association submitted an amicus brief to the U.S. Court of Appeals for the Second Circuit in the case of Lehman Brothers Special Financing Inc. v. Branch Banking and Trust Co., et al. This was the Association’s third brief in support of the defendants in this case, this time in response to Lehman’s appeal to the U.S. District Court’s (Southern District of New York) affirmation in March 2018 of the U.S. Bankruptcy Court’s previous dismissal of the case.

The case centers on the treatment of a so-called “flip clause” in a securitization waterfall in the event of a bankruptcy – a “flip clause” redirects or reprioritizes cash flow upon bankruptcy, and often comes up in securitizations that include swaps. The Association’s rationale for filing the amicus brief was to voice members’ views that a ruling favorable to Lehman would result in uncertainty detrimental to the structured finance market. This brief was prepared for the Association by counsel at Freshfields Bruckhaus Deringer.

Read the Amicus Brief Here