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Enron Mail |
The Argentine House of Representatives is currently analyzing a bill passed
by the Senate in Nov. 2000 that would amend the existing Bankruptcy Law No 24.522, specifically providing for early termination and netting of derivative transactions in the event of insolvency proceedings and bankruptcy. Judging from the speed at which this paper is moving, it is likely to get passed sooner than expected. The highlights are: Insolvency Proceeding: *Condition: Existence of a Master Agreement (MA) between the parties. *Transactions to be considered: All derivative transactions between the parties under the MA. * Effects: (a) The solvent party may elect to exercise its right to early terminate the MA, and would be able to net all transactions between the parties. (b) Upon approval by the judge, (prior approval by trustee), the MA may continue in effect allowing the solvent party to demand payment of all obligations pending on the date the of the filing of the proceeding. * Cherry-picking: Under this structure, the insolvency proceeding trustee would no longer be able to cherry-pick the contracts that may continue in force, since all derivative transactions under a MA would be deemed as a single contract between the parties. Bankruptcy: *Condition: Existence of a MA between the parties. *Transactions to be considered: All derivative transactions between the parties under the MA. *Termination: If specifically provided for under the MA, the solvent party may exercise its right to early terminate all derivative transactions under the MA and net the positions pursuant to the procedure set forth under the contract. *Guarantees: Would be foreclosed against the net balance on the date of termination. *Derivatives contracts: The Central Bank would issue a list of qualifying derivative contracts comprised under the law. * Applicable Law and jurisdiction would be Argentine in both cases. I will keep you informed of any new events. Please feel free to contact me if you have any questions. Regards, Andrea
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