Repo operations are a form of secure financing. A repurchase agreement usually includes a securities seller, a security buyer who effectively provides the seller with a guaranteed credit, a captain`s agreement between the parties and a custody agreement between the buyer and an institutional custodian. In Section 101 (38A) (A) of the Bankruptcy Code, in a relevant part, “Master Netting-Vereinbarung” is considered “Exercise by a … The financial institution… contract law … as part of an agreement or guarantee agreement or other credit enhancement that is part of a … Securities or contract law contract … termination value, payment amount or any other transfer obligation arising from or related to 1 or more of these contracts, including such, to be compensated or compensated. …” There will always be a situation where it is not known whether a certain type of asset is a qualified asset for safe ports. For example, while it is clear that a mortgage is a qualified asset, commercial mortgage transactions are often documented in part in the form of mortgages and partly in the form of mezzanine loans.
A mezzanine loan is not, by nature, a mortgage, but a loan secured by holdings in the owner of the underlying property. There remains doubt as to how a bankruptcy court would deal with this mezzanine loan in the context of safe havens. This uncertainty can be addressed by using parallel structures that receive secure port treatment because of a link to a qualified pension contract or as part of a qualified pension repurchase contract, such as commitments, security agreements and credit enhancement agreements. The Bankruptcy Act in many respects limits the rights of non-debtors in contracts with a bankrupt debtor. However, some important exceptions are considered important by Congress for the orderly operation of securities markets. In particular, repurchase agreements (or repurchase transactions involving a financial institution) may be terminated and liquidated, regardless of the fund seller`s bankruptcy application. This article navigates through the various provisions of the Bankruptcy Act that allow the termination and liquidation of typical pension contracts and exclude non-declaration of prior declaration, regardless of the severity of a bankruptcy procedure. In accordance with the provisions of the deposit agreement, the purchaser requires the custodian to maintain a deposit for the purpose of depositing the securities subject to the reassor transactions. As a general rule, the custodian acts as an intermediary for the purchaser with respect to the right to terminate, liquidate, accelerate, accelerate, extrapolate and compensate transactions and, moreover, to take corrective action at the buyer`s disposal under the corresponding pension agreement. Therefore, exemptions from automatic suspension and anti-ipso facto provisions of the Bankruptcy Act should also apply to repurchase transactions, as long as they are carried out under the usual framework contracts.