Deutsche Bank v The International Banking Corporation

This post reviews documents submitted in the action commenced by Deutsche Bank against The International Banking Corporation in the Supreme Court of New York (Case Index # 601471/2009). This case has been stayed following TIBC's filing of a petition under Chapter 15 of Title 11. Chapter 15 provides for USA recognition of insolvency or reorganization legal proceedings in other countries.  When that recognition is given then all legal proceedings in the USA are stopped pending the outcome of the foreign case.

As before I recommend that you review the documents yourselves. You can do this by going to the NY Supreme Court website and using the above Case Index Number to search. As you progress from page to page, look for the button for e-filed documents. This earlier post has some instructions on how to navigate the NYSC website.

While this case has been stayed, it does provide a bit of additional information, though this is more just on the existence of the debt.

Here are DB's allegations:

1. On 6 April 2009, DB and TIBC entered into two equal forward US$/Sterling foreign exchange transactions.  DB was obligated to pay TIBC US$59,762,440 and TIBC to pay DB Sterling 40,000,000 value 8 May 2009. 
2. These were not "split" value date transactions. Both parties were to settle on the same day. So there is nothing unusual. These appear to be "garden variety" forwards. 
3. DB delivered on its side of the transaction by paying the funds to TIBC's account at HSBC New York. 
4. TIBC did not pay the Sterling DB.
   

DB is claiming a total of US$74,232,440. 

1. This is equal to the US$ side of the defaulted FX forward plus termination fees estimated at US$14,470,000. 
2. There isn't a detailed explanation as to how this latter amount was calculated. I presume it refers to DB's cost of closing out other forward FX transactions with TIBC and represents the difference between the contractual rate with TIBC and the market rate at closeout. 
3. Clearly, since TIBC has defaulted on the two 8 May settlements, DB has no desire to make additional payments since it believes (and probably rightly so) that TIBC would not honor its side of these transactions. 
4. The dealing relationship between the two banks is documented by an ISDA Master Agreement which gives either party the right to terminate any outstanding deals if the other to the agreement fails to perform. The Master Agreement also provides that the defaulting party must pay the "break" or "replacement" costs of outstanding deals which the other party cancels as a result of the default as well as any legal costs related to enforcement of the MA.
   

There's not a lot more to note here.