Equitable Subordination and Recharacterization of Loans: Avoiding Pitfalls for Lenders, Creditors, and PE Sponsors

Navigating Circuit Split in Bringing or Defending Bankruptcy Preference Actions

A live 90-minute CLE webinar with interactive Q&A


Wednesday, March 4, 2020 (in 13 days)

1:00pm-2:30pm EST, 10:00am-11:30am PST

or call 1-800-926-7926

This CLE webinar will offer best practices for counsel to lenders, creditors, and private equity sponsors to structure transactions and lending practices to protect their claims and maintain their priority status against junior and unsecured creditors or borrowers facing insolvency or bankruptcy.

Description

Junior or unsecured creditors often assert equitable subordination and recharacterization claims against secured creditors in order to enhance recovery from highly leveraged debtors. When addressing the liquidity of their portfolio companies, PE sponsors are vulnerable to attacks on their claims.

Recharacterization claims usually involve insiders like stockholders, directors, and officers. However, the doctrine is not limited to corporate insiders, and courts will scrutinize both the debt instrument and the creditor's status.

Both doctrines are heavily litigated with recent cases that reflect the continued inconsistency among circuit courts and differing standards used among courts to scrutinize various loan transactions.

Listen as our authoritative panel of bankruptcy attorneys discusses the looming threats of equitable subordination and recharacterization in bankruptcy and how lenders, creditors, and PE sponsors can minimize exposure and protect their claims.

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Outline

  1. Overview of equitable subordination and recharacterization
    1. Equitable subordination
    2. Recharacterization
    3. Recent case law
    4. Litigation considerations
  2. Minimizing attacks on the claim
    1. Secured lenders
      1. Underwriting
      2. Collateral review
    2. PE sponsors
      1. Anticipating liquidity problems
      2. Internal governance procedures
      3. Arm's length transactions
      4. Management rights or other control of business operations
    3. Creditors
      1. Non-statutory insiders

Benefits

The panel will review these and other key issues:

  • How have the courts defined "inequitable conduct" to justify equitable subordination?
  • What factors do the courts use to distinguish a loan transaction from an equity investment to justify recharacterization?
  • How can PE sponsors loaning money to their portfolio companies protect themselves from attack?

Faculty

Anderson, Eric
Eric W. Anderson

Partner
Parker Hudson Rainer & Dobbs

Mr. Anderson concentrates his practice in bankruptcy, workouts, financial restructuring and commercial finance. He...  |  Read More

Herman, Ira
Ira L. Herman

Partner
Blank Rome

Mr. Herman concentrates his practice on distressed public debt issues, insolvency matters involving upstream and...  |  Read More

Kaplan, Gary
Gary M. Kaplan

Partner
Farella Braun + Martel

Mr. Kaplan represents debtors, secured and unsecured creditors, creditors' committees and trustees in a wide...  |  Read More

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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

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