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Enron loses appeal in battle to avoid and recover redemption payments
By Caroline Salls
Pittsburgh, June 28 - Enron Creditors Recovery Corp. lost its appeal regarding a pre-bankruptcy redemption of commercial paper, according to an opinion issued Tuesday by the U.S. Court of Appeals for the Second Circuit.
The appeals court affirmed the U.S. District Court for the Southern District of New York ruling, which reversed a bankruptcy court decision that the Enron redemption payments did not constitute settlement payments under the safe harbor provisions of the Bankruptcy Code.
Enron Creditors Recovery challenged the district court's ruling that the safe harbor provision protects from avoidance pre-bankruptcy payments the company made to redeem the commercial paper before maturity.
The Enron Corp. successor argued that Enron's payments were not settlement payments under the safe harbor provision because they were repayments of debt and not common in the securities industry.
The U.S. Bankruptcy Court for the Southern District of New York ruled previously that the payments were not protected from avoidance because they were used to retire debt, not to purchase securities, and because they were extraordinary.
According to the appeals court decision, Enron Creditors Recovery is attempting to avoid and recover payments Enron made to redeem the commercial paper from Alfa, SAB de CV, ING VP Balanced Portfolio, Inc. and ING VP Bond Portfolio, Inc., whose notes were redeemed by Enron.
Enron is a Houston-based energy company that emerged from bankruptcy on Nov. 18, 2004.
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