A step forward – the FirstEnergy Solutions court comes to the commonsense conclusion that steel forges aren’t “forward contract merchants.”
February 19, 2019
Authored 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, 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” 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 of