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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Bankruptcy

Date & Time
  • event Date

    Thursday, May 9, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE course 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.

Faculty

Gary M. Kaplan
Partner, Chair Restructuring, Insolvency and Creditors Rights Practice Group
Farella Braun & Martel LLP

Mr. Kaplan has decades of experience representing debtors, creditors, creditors' committees, trustees, and receivers in a wide range of bankruptcy and nonbankruptcy matters. His practice includes both out of court and Chapter 11 restructurings and advising clients regarding pre- and post-bankruptcy strategy, debt collection, judgment enforcement, and provisional remedies. Mr. Kaplla represents lenders and borrowers in a wide range of financing transactions, including debtor-in-possession financing, as well as lease and guaranty matters. He also has extensive litigation experience in bankruptcy and non-bankruptcy courts, at trial and appellate levels, including in the U.S. Supreme Court. Mr. Kaplan counsels companies and individuals experiencing financial and operational challenges in myriad industries. He helps clients restructure their finances, build and negotiate sustainable workout plans with creditors, and develops other creative solutions to avoid bankruptcy, including refinancings, divestitures, joint ventures, and licensing deals. Mr. Kaplan also represents both secured and unsecured creditors, creditors’ committees, landlords, and equity holders in creative recovery solutions in and outside of bankruptcy. He has proved adept at protecting landlord’s rights in retailer bankruptcy cases nationwide through negotiation and litigation when necessary. He has extensive experience in insolvency-related litigation, including preference and fraudulent transfer claims, as well as defending guarantors, owners, directors and officers.

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Description

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

The Bankruptcy Code also provides for subordination of claims based on the purchase or sale of securities of a debtor or its affiliate, so that such claims are treated as having equal or lesser priority of claims based on the relevant securities.

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.

The subordination and recharacterization 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.

Outline

  1. Overview of subordination and recharacterization in bankruptcy
    1. Equitable subordination
    2. Subordination of claims based on purchase or sale of securities
    3. Recharacterization
    4. Recent case law
    5. 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
      2. Claimants with securities purchase/sale-related claims

Benefits

The panel will review these and other key issues:

  • How have the courts defined "inequitable conduct" to justify equitable subordination?
  • How do courts analyze potential subordination of claims related to the purchase or sale of securities?
  • What factors do the courts use to distinguish a loan transaction from equity investment to justify recharacterization?
  • How can PE sponsors loaning money to their portfolio companies protect themselves from attack?