An Enron Corp successor seeking money for the energy giant's creditors cannot rely on bankruptcy law to undo the company's rushed sale of commercial paper just before its 2001 collapse.

The 2nd Circuit Court of Appeals in New York on Tuesday said funds that bought the debt were shielded by safe harbor laws that prevented Enron from categorizing their purchases as illegal conveyances.

These funds included two managed by a unit of ING Groep NV , and one by Mexico's Alfa SAB .

Enron redeemed the commercial paper in the fall of 2001 to shore up its rapidly deteriorating liquidity, just weeks before its December 2 bankruptcy, the sixth-largest in U.S. history. Its successor, Enron Creditors Recovery Corp, still seeks money for the Houston-based company's creditors.

Legal proceedings over the commercial paper, which is short-term debt that companies often issue to fund day-to-day operations, began in 2003.

Enron had prematurely redeemed about $1.1 billion of commercial paper at above-market prices. Its successor contended that the prices were excessive and resulted from coercion by noteholders, but the noteholders said the buyback was a strategic move by Enron to calm irrational markets.

While most of the nearly 200 buyers of the commercial have settled with Enron, ING and Alfa did not, saying safe-harbor provisions of U.S. bankruptcy law shielded their purchases from the reach of creditors.

In a 2-1 ruling, the Second Circuit said it became the first federal appeals court to extend the safe-harbor provision to cover early redemption of commercial paper.

We see no reason to think that undoing Enron's redemption payments, which involved over $1 billion and approximately 200 noteholders, would not also have a substantial and similarly negative effect on the financial markets, Judge John Walker wrote for the appeals court majority.

A variety of regulators, including the Securities and Exchange Commission, had filed briefs supporting the noteholders in the case.

Michael Cook, a partner at Schulte Roth & Zabel who represented Alfa, said he expects Enron will appeal.

Enron representatives could not be reached for comment.

(Reporting by Jeff Roberts; Editing by Gary Hill)