Lehman Bros. Special Financing v. Ballyrock ABS CDO 2007-1 Ltd. (In Re Lehman Bros. Holdings), 452 B.R. 31

LBSF and Ballyrock executed an ISDA master agreement with a Schedule and Credit Support Annex (LBHI as guarantor).
Ballyrock issued notes to investors under an Indenture with Wells Fargo as Trustee and a Waterfall priority scheme.
A Defaulted Synthetic Termination Payment right was created, subordinating LBSF’s termination payment if Ballyrock defaulted.
LBHI filed for chapter 11, triggering an Event of Default under the Ballyrock Master Agreement.
Ballyrock designated September 16, 2008 as Early Termination Date after LBHI’s bankruptcy, declaring a termination payment due to LBSF.
LBSF sought declaratory relief and injunctive relief to prevent the Proposed Distribution of $137 million to Senior Noteholders; Ballyrock and others moved to dismiss.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Defaulted Synthetic Termination Payment Clause is an unenforceable ipso facto	LBSF argues clause alters priority due to bankruptcy and is ipso facto	Ballyrock contends clause is valid contract allocation within Waterfall	Clause appears unenforceable as ipso facto per analysis similar to Perpetual
Whether the clause falls within safe harbors of §560	LBSF contends safe harbor does not justify depriving pre-existing rights	Ballyrock argues clause preserves rights via termination mechanics	Safe harbor does not protect the clause; it changes substantive rights and is not termination/acceleration under §560
Whether Count II (ineffective termination of CDS) states a claim	LBSF argues termination of Transactions was improper under Indenture	Ballyrock asserts Transactions were terminated properly independent of CDS restrictions	Count II dismissed; termination of Transactions was proper and not subject to Indenture CDS limits

In re Lehman Bros. Holdings Inc., 422 B.R. 407 (Bankr.S.D.N.Y. 2010), 422 B.R. 407 (Bankr. S.D.N.Y. 2010) (Perpetual; ipso facto protections apply to bankruptcy events of related entities)