In re Ocana
United States District Court for the Southern District of New York
151 B.R. 670 (1993)
As part of a reinsurance arrangement, Latino Americano de Reaseguros, S.A. (LARSA) promised to reimburse the Insurance Corporation of Hannover (Hannover) for certain losses, backed by a standby letter of credit that LARSA had Banco Cafetero (Banco Cafetero) issue in Hannover's favor, secured by LARSA's collateral. When LARSA filed for the Panamanian equivalent of bankruptcy, Hannover sued Banco Cafetero in the United States to draw on the letter of credit for LARSA's failed reimbursements. LARSA then obtained an injunction from a New York bankruptcy court under the automatic-stay provisions of the Bankruptcy Code, blocking Hannover's suit against Banco Cafetero, and Hannover appealed.
Whether the automatic-stay provisions of the Bankruptcy Code prevent a beneficiary from drawing on a debtor's standby letter of credit if the debtor has merely filed for bankruptcy.