Rough Waters In Bankruptcy Code's Safe Harbors

Law360, New York (May 2, 2011, 2:28 PM EDT) -- For years, the Bankruptcy Code’s safe harbor provisions ensured that energy companies would suffer little interruption in exercising setoff and termination rights with regard to a bankrupt counterparty. The energy company might suffer a market-driven financial loss, but the safe harbor provisions allowed it to terminate, liquidate and accelerate its trading agreements with the debtor in a relatively seamless manner.

Similarly, the safe harbor provisions guaranteed that the energy company could exercise its contractual setoff rights (including the ability to setoff amounts owed to it against...
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