Butterworths Journal of International Banking and Financial Law

In this article, Robert Scheininger compares Westinghouse to cases involving disputes in syndicated loan trades and discusses some of the differences between the bankruptcy claims and syndicated loan trading markets in order to draw some practical lessons.

“A trade is a trade” is a fundamental tenet of the distressed secondary trading market. Market participants rely on the expectation that when two sophisticated parties agree to trade at a particular price, they will complete the trade notwithstanding subsequent price movement. That reliance provides stability and predictability to the robust distressed trading community. However, as highlighted in a 2018 bench decision in the Southern District of New York, if and when a trade has actually occurred may be subject to scrutiny and may differ in the context of bankruptcy claims as compared to the more established market of syndicated loan trading. Therefore, distressed debt traders and their advisors paid attention to In re Westinghouse Electric Co., 588 B.R. 347 (Bankr. S.D.N.Y. 2018) (Westinghouse). Although it is not yet clear whether the Westinghouse decision will impact the bankruptcy claims trading market, there are certainly lessons to be learned for those who regularly trade this product. In particular, clear communication between trading counterparties is essential in establishing a binding, enforceable agreement.  

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