LBO Transactions in Bankruptcy: Fraudulent Transfer Issues for Lenders, Equity Purchasers, Shareholders

Leveraged buyout transactions continue to be aggressively attacked in bankruptcy cases as alleged fraudulent transfers to lenders, buyers and sellers alike. Between the Supreme Court’s decision in Merit Management Group, LP v. FTI Consulting, Inc., the Second Circuit’s decision in In re Tribune Fraudulent Conveyance Litigation, and the pending petition for certiorari from the Second Circuit’s decision in Deutsche Bank Trust Company Americas, et al., v. Robert R. McCormick Foundation, et al., the landscape for these claims continues to evolve. Even with these decisions, however, there is a still a lot of room for debate and a lot of disagreement between courts and jurisdictions.

Listen as our authoritative panel of bankruptcy attorneys discusses the recent decisions in fraudulent conveyance claims relating to LBO transactions, the issues that remain pending before the various tribunals, and which issues remain unresolved. As a part of this discussion, the panel will discuss different approaches to mitigating risk in LBO transactions, as well as potential areas of dispute in future claims.

1. Avoidance actions: standards in the LBO context
   1. Reasonably equivalent value
   2. Insolvency or unreasonably small capital
   3. Collapsing loan transactions
   4. Section 546(e) safe harbor
2. Recent LBO/fraudulent transfer litigation
   1. Merit Management v. FTI
   2. Tribune
   3. Lyondell
   4. TOUSA

The panel will review these and other crucial issues:

• What factors are critical in a court’s analysis of whether an LBO is avoidable as a fraudulent conveyance?
• Are any LBO structures less vulnerable to attack?
• What are the safe harbors for LBO participants?
• What steps can sellers and PE firms take to mitigate avoidance risks?