Close-out and valuation under ISDA

Simmons & Simmons outlines the implications of the Peregrine Fixed Income vs Robinson Department Stores judgment.

The Peregrine swaps litigation case came to a close in May. The verdict of the High Court of England and Wales could have a significant impact on the close-out and valuation of certain derivatives trades documented by the International Swaps and Derivatives Association ISDA.

The background

Peregrine Fixed Income and Robinson Department Store had entered into a trade under an ISDA master agreement. Peregrine defaulted a liquidator was appointed over its assets and an early termination date occurred. At that time, Peregrine did not have any outstanding payment obligations. But Robinson, which was itself in financial difficulties, would have been obliged to make 25 annual payments of about $6 million each to...

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