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The Constellation Experience

Ring-fencing after the subprime meltdown.

Fortnightly Magazine - August 2010

built on fraud, and in particular accounting fraud.

17. In re Heisley v. U.I.P. Engineered Prods. Corp., 831 F.2d 54, 56 (4th Cir. 1987). The Heisley court found that the subsidiaries’ filing was proper even though the subsidiaries were solvent. See also, In re Mirant Corp ., 2005 WL 2148362 (Bankr. N.D. Tex. Jan 26, 2005) (noting that adverse impact of parent and affiliate filings could warrant need for subsidiary to file for bankruptcy protection). This is not to presume or prejudge the outcome in any particular case where creditors of the solvent subsidiary oppose such a filing.

18. Other major acts of corporate reorganization are also typically made subject to the golden vote requirement.

19. In re Gen. Growth Props., Inc. , No. 09-11977, slip op. at 33 (Bankr. S.D.N.Y. Aug. 11, 2009).

20.   Id. at 28.

21. Case 9173 Transcript at 1120. Mr. Atkins was at that time an executive director in the Securitization and Asset Monetization Group of Morgan Stanley & Co., Inc.

22. In re Owens Corning , 419 F.3d 195, 212 (3d Cir. 2005) (footnote and citations omitted).

23. Eastgroup Properties v. S. Motel Assoc., Ltd.,  935 F.2d 245, 249 (11th Cir. 1991) (internal citation omitted).

24. Again, the particulars of the MDPSC order provide a worthwhile laundry list of relevant factors bearing on the issue of separateness. Order No. 82986, at 46-53.

25. Standard & Poor’s, Ringfencing Subsidiaries from Parent Bankruptcies in California (Oct. 2001).

26. Rebuttal Testimony of Charles N. Atkins II at 7, In re Balt. Gas & Elec. Co. , Case No. 9173, Phase II (Md. Pub. Serv. Comm’n., Sept. 8, 2009).

27. Charles E. Peterson & Elizabeth M. Brereton, Utah Dep’t of Commerce, Report on Ring-Fencing 18 (Sept. 2005) (“Peterson Report”) (quoting Peter N. Rigby, Standard & Poor’s, “Ring-Fencing” Subsidiaries to Protect from Parent Bankruptcies During the California Power Crisis , 9 The Financier 30, 32-33 (2009)) .

28. Case 9173, Transcript at 1113-14.

29. Peterson Report at 18 (quoting Peter Rigby, supra note 29).

30. Joint Report & Application of Oncor Elec. Delivery Co. & Tex. Energy Future Holdings Ltd. P’ship. Pursuant to PURA § 14.101, Docket No. 34077, Order at 9 (Tex. Pub. Util. Comm’n., Feb. 22, 2008) (“ A majority of Oncor Electric Delivery Holdings’ board members and Oncor’s board members will qualify as ‘independent’ in all material respects in accordance with the rules and regulations of the New York Stock Exchange. ”)

31. Order No. 82986, at 53 (footnote omitted).

32. In re H.M. Byllesby & Co. , 6 S.E.C. 639, 1940 WL 36326, at *13 (Jan. 15, 1940) (quoting President Roosevelt’s note to Congress accompanying 1935 Act).