Leveraged Buyout Transactions Under Heightened Scrutiny in Bankruptcy

Withstanding Creditor Challenges to Fraudulent Transfer Claims

Delaware Bankruptcy Court rules Mervyn's lawsuit against Target and PE groups may proceed

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, May 26, 2010

Recorded event now available

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Program Materials

This CLE webinar will update practitioners on the latest challenges to leveraged buyout transactions in bankruptcy. The panel will explain the implications of particular deal structures, review underlying legal theories of creditor challenges, and outline best practices to mitigate risk.

Description

As many of the leveraged buyout transactions in recent years head into bankruptcy, creditors are aggressively attacking these deals, alleging fraudulent transfer by the lenders and equity purchasers. Creditor challenges in the high profile Lyondell and Tribune Company cases exemplify this trend.

In addition, the Delaware bankruptcy court recently upheld Mervyn’s lawsuit against Target and three private equity firms regarding the LBO sale of Mervyn’s. Sellers and equity firms in LBOs must carefully consider the effect of buyouts on the target company’s creditors.

The recent TOUSA case, while not involving an LBO transaction, provides another illustration of the issues that arise in complex avoidance actions and warns lenders that courts are increasingly willing to closely scrutinize complex commercial financing transactions.

Listen as our authoritative panel of bankruptcy attorneys discusses recent trends in creditor challenges to leveraged buyout transactions and provides different approaches to mitigate the risk of an avoidance action in bankruptcy.

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Outline

  1. Avoidance actions: standards in the LBO context
    1. Reasonably equivalent value
    2. Insolvency or unreasonably small capital
    3. Section 546(e) settlement payments
  2. Latest challenges
    1. TOUSA
    2. Boyer
    3. Lyondell
    4. Tribune Co.
    5. Mervyn’s
  3. Structuring deals to mitigate risk

Benefits

The panel will review these and other key questions:

  • What factors are emerging as critical in courts' analysis of whether an LBO is avoidable in bankruptcy?
  • What LBO structures are being implicated by creditor challenges?
  • What steps can sellers and PE firms take to mitigate avoidance risks?

Faculty

Douglas S. Mintz
Douglas S. Mintz

Special Counsel
Cadwalader Wickersham & Taft

He has experience in all aspects of bankruptcy and restructuring, representing secured lenders, debtors and official...  |  Read More

Steven T. Bobo
Steven T. Bobo

Partner
Reed Smith

His practice focuses on bankruptcy and workout matters, representing both debtors and creditors. He is regularly...  |  Read More

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