A third court confirms that settlement payments are still settlement payments and early redemptions of notes prior to maturity are exempted from preference actions. Calling the case “easily decided” in light of the Second Circuit’s holding and analysis in Enron (the subject of an earlier Basis Points blog post), the United States District Court for the Southern District of New York affirmed the Bankruptcy Court’s decision (the subject of another Basis Points blog post), namely that the redemption of notes prior to maturity was exempt from preference actions under the safe harbor provision of Bankruptcy Code § 546(e). Official Comm. of Unsecured Creditors of Quebecor World (USA) Inc. v. Am. United Life Ins. Co., No. 11 Civ. 7530 (S.D.N.Y. Sept. 28, 2012). A copy of the decision can be found HERE.
The District Court, like the Bankruptcy Court below, found no ambiguity in the Second Circuit’s Enron analysis and holding that a “settlement payment” for purposes of the safe harbor provision of Bankruptcy Code § 546(e) is interpreted broadly to mean “the transfer of cash or securities made to complete a securities transaction.” The Court concluded that it was compelled to follow the Second Circuit’s decision in Enron and that any narrowing of the term “settlement payment” would have to come from the Second Circuit itself or from the Supreme Court.