A step forward – the FirstEnergy Solutions court comes to the commonsense conclusion that steel forges aren’t “forward contract merchants.”

February 19, 2019

by: Jacob Johnson

Thomas Paine would be proud of this Court’s commonsense approach to the Bankruptcy Code

 

In the In re FirstEnergy Solutions Corporation bankruptcy cases,[1] the court recently issued an opinion narrowing the number of situations in which a fixed-price supply agreement (used to hedge against rising input costs and constituting a “forward contract” in bankruptcy parlance) will be treated as an exception to the general rules governing “executory contracts”[2] in chapter 11 bankruptcy cases.

The “automatic stay” under section 362 of the Bankruptcy Code usually prevents a contract counterparty from terminating an executory contract without first getting court approval (i.e., relief from the automatic stay); this is true even if the contract provides it may be terminated upon the filing

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