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4 edition of The application of fraudulent transfer laws to leveraged buyouts found in the catalog.

The application of fraudulent transfer laws to leveraged buyouts

The application of fraudulent transfer laws to leveraged buyouts

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  • 39 Currently reading

Published by American Bar Association in [Chicago, Ill.] .
Written in English

    Subjects:
  • Leveraged buyouts -- United States,
  • Fraudulent conveyances -- United States

  • Edition Notes

    StatementJudith Elkin, Sarah B. Foster.
    ContributionsFoster, Sarah B., American Bar Association. Section of Litigation.
    Classifications
    LC ClassificationsKF325.194.A8 E415 1997
    The Physical Object
    FormatMicroform
    Pagination35 p.
    Number of Pages35
    ID Numbers
    Open LibraryOL17743112M
    OCLC/WorldCa47057880

    A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money to meet the cost of assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The use of debt, which normally has a lower cost of capital than equity, serves to reduce the overall cost of. The Merit decision thus seemingly revived a bankruptcy estate’s ability to pursue constructive fraudulent transfer claims arising out of a leveraged buyout or similar securities transaction gone.

    these questions. Along the way, we will identify defects in fraudulent transfer law that have resulted in harm being left unremedied and inadequately disincentivized. To assist in correcting these defects, we will recommend ways to recalibrate the scales of justice to better ascertain fraudulent transfers in leveraged buyouts. S.D.N.Y. Jan. 14, ) recently held that the safe harbor provision of 11 U.S.C. § (e) did not bar unsecured creditors from seeking, under state fraudulent transfer law, to recover payouts made to former shareholders of a company acquired in a leveraged buyout.

      Senior lenders also face risks with respect to highly leveraged borrowers such as in a leveraged acquisition financing situation such as a leveraged buyout or a leveraged recap. In transactions which add substantial debt and give rise to a substantial risk of bankruptcy or insolvency, fraudulent transfers by a highly leveraged borrower to the. Although fraudulent transfer law originally evolved in the context of a relatively simple agrarian economy, it is now widely used to challenge complex modern financial transactions such as leveraged buyouts. Fraudulent transfer liability will often turn on the financial condition of .


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The application of fraudulent transfer laws to leveraged buyouts Download PDF EPUB FB2

From LBO participants.6 The law of fraudulent transfers is the most creditor protective.7 This body of law originated several centuries ago at a time when Supp.

(N.D. Ill. ), rev'd on other grounds, F.2d(7th Cir. ), cert. denied, U.S. enacted a law that voided all transfers by debtors whose purpose was to hinder, delay, or defraud their creditors.' The "Statute of 13 Elizabeth" was transferred into early American jurisprudence Matthew T.

Kirby et al., Fraudulent Conveyance Concerns in Leveraged Buyout Lending, 43 Bus. LAW Author: Raymond J. Blackwood. LLeveraged Buyouts as Fraudulent Transferseveraged Buyouts as Fraudulent Transfers The heyday of highly leveraged transactions in the late s and early s was followed by a spate of failed companies and unhappy creditors.

These dynamics resulted in signifi cant developments in the application of fraudulent transfer laws to leveraged.

The case law provides several factors that are critical to a court’s analysis of whether an LBO is avoidable pursuant to applicable fraudulent transfer law. LBOs as Actual Fraudulent Transfers.

In Part I of this Note, I will provide a general overview of leveraged buyouts. The discussion of how and why LBOs are implemented is particularly relevant to the application of fraudulent transfer analysis. In Part II, I will discuss fraudulent transfer law as defined by the Bankruptcy : Jaclyn Weissgerber.

North Dakota Law Review Volume 69 Number 1 Article 3 Applying the Law of Fraudulent Conveyances to Bankrupt Leveraged Buyouts: The Bankruptcy Code's Increasing Leverage over Failed LBOs Anthony Michael Sabino Follow this and additional works at: Part of the Law Commons Recommended Citation.

The first chapter the book covers “fraudulent transfers,” which means various devices used by debtors or creditors to work fraud on others (such as competing creditors).

The chapter ends with a discussion of leveraged buyouts as fraudulent transfers. In Part I of this Note, I will provide a general overview of leveraged buyouts.

The discussion of how and why LBOs are implemented is particularly relevant to the application of fraudulent transfer analysis. In Part II, I will discuss fraudulent transfer law as defined by the Bankruptcy Code.

In Part III, I will discuss which transfers within the LBO should be attacked under fraudulent. III. LEVERAGED BUYOUTS AS FRAUDULENT TRANSFERS In the late s and through the s, as the heyday of highly leveraged transactions was followed by a spate of failed companies and unhappy creditors, there were significant developments in the application of fraudulent transfer laws to leveraged buyouts.

application of the fraudulent transfer laws to leveraged buyouts,4 nu-merous cases under the Uniform Fraudulent Conveyance Act ("UFCA") and the bankruptcy laws have avoided such transfers when these statutes were otherwise applicable.5 3 See generally Ash, The Lender, in Leveraged Buyouts(P.L.I.

Corp. & P. A leveraged buyout that could be at risk as a constructive fraudulent transfer is one for which: (1) the separate transactions comprising the leveraged buyout should be. the Uniform Fraudulent Transfer Act (UFTA).6 Wahl: Fraudulent Conveyance Law and Leveraged Buyouts: Remedy or Insura Published by Mitchell Hamline Open Access, B.

Application of Fraudulent Conveyance Law to LBOs The fraudulent conveyance statutes-whether under the. Beginning in June ofsomething changed: three decisions seemed to resuscitate the possible application of fraudulent transfer law to LBO transactions.

The first, and probably most significant, is FTI Consulting, Inc. Merit Management Group, LP, F.3d (7 th Cir. ), involving the section (e) defense discussed earlier.

For articles opposing the application of fraudulent conveyance law to LBOs, see Douglas G. Baird & Thomas H. Jackson, Fraudulent Conveyance Law and Its Proper Domain, 38 Vand. Rev. (); and Robert J. White, Leveraged Buyouts and Fraudulent Conveyance Laws Under the Bankruptcy Code--Like Oil and Water, They lust Don t Mix, ANN.

The is the third lesson on voidable or fraudulent transfers under the Uniform Voidable Transactions Act (a slightly amended Uniform Fraudulent Transfers Act) and section of the Bankruptcy Code.

This lesson deals with applications in leveraged buyouts (LBOs). (85) For an early debate on the application of fraudulent transfer laws to LBOs, see, e.g., Douglas G. Baird & Thomas H. Jackson, Fraudulent Conveyance Law and Its Proper Domain, 38 Vand.

Rev. () and Raymond J. Blackwood, Note, Applying Fraudulent Conveyance Law to Leveraged Buyouts, 42 Duke L.J. The difficulty of attempting to apply fraudulent transfer law to mod- ern transactions is the struggle of "apply[ing] a law with its origins in 16th century England to a financial transaction [a leveraged buyout].

Carlson, Leveraged Buyouts in Bankruptcy, 20 GA. REv. 73, (). Professor Carlson's article discusses the application of fraudulent conveyance laws to buyouts, focusing on the fraudulent conveyance provisions of the fed-eral Bankruptcy Code.

The opening sections of. Fraudulent Transfers. Leveraged Buyouts and Fraudulent Transfers: Life After Gleneagles David A. Murdoch, Linda D. Sartin, and Robert A.

Zadek, 43(1): 1–26 (Nov. ) As a result of the significant increase in leveraged buyout transactions over the past ten years, both sellers and lenders face a vast array of complex legal and financial questions as they plan their buyout strategy.

Domain, 38 Vand. Rev.() (arguing that leveraged buyouts should be outside the realm of fraudulent conveyance law). See Lowenstein, supra note 7, at Professors Baird and Jackson, who believe that leveraged buyouts do not fall within the proper domain of fraudulent con.

protect transfers made in connection with a private company LBO. A plain meaning application of section (e) by the Supreme Court could bolster the view that the section safe harbors apply only to actions commenced by a trustee and do not preempt state law fraudulent transfer claims brought by creditors or other creditor representatives.

Inthe U.S. Court of Appeals for the Second Circuit made headlines when it ruled that creditors' state law fraudulent transfer claims arising from the leveraged buyout. Fraudulent conveyance litigation arising from failed leveraged buyout transactions is frequently pursued in bankruptcy proceedings as the sole source of recovery for creditors.