Section 510(b) of the Bankruptcy Code expressly subordinates claims arising from the purchase or sale of a security in the debtor or an affiliate to the level of equity. It thus functions as a form of recharacterization. Despite its broad scope, § 510(b) is relatively underused, making it a potentially powerful tool for creative debtors, committees and trustees.
Courts have held that bankruptcy courts have the authority to recharacterize debt to equity if the circumstances warrant such treatment. However, circuit courts are divided as to which provision of the Bankruptcy Code provides such authority. The majority looks to the court’s equitable powers.
Private-equity funds typically provide capital to portfolio companies through equity infusions and debt financing depending on the fund’s investment strategy and the needs of the portfolio company.
Fraudulent transfer plaintiffs be reminded: the heightened pleading standard in Rule 9(b) continues to create difficulty surviving a motion to dismiss actual fraudulent transfer claims. In In re Lyondell Chem. Co,[1] in the context of fraudulent transfer litigation following a leveraged buyout, the United States Bankruptcy Court for the Southern District of New York reaffirmed that the Rule 9(b)
Chasing fraudsters is never easy. They always appear to be one step ahead and creditors, in addition to having to prove the fraudulent transaction, have to also find the money or assets and be able to recover them.
In a recent decision, the United States Court of Appeals for the Seventh Circuit provided further clarification regarding the defenses available to “mediate or immediate transferees” who receive an otherwise avoidable transfer.[1]
The Bankruptcy Litigation Committee had a tremendous 2015! We strived to continue to provide our members with enlightening and useful substantive information, while also offering enjoyable and valuable social and networking opportunities.
2015 was an exciting and eventful year for the Legislation Committee itself, as well as for its leadership. While third-year Committee Co-Chair Jon Lieberman is concluding his final term, he is looking forward to his new role as an Associate Editor of the ABI Journal.
As we close 2015 with more hospital bankruptcies being filed around the country, the ABI Health Care Committee is expecting an interesting year ahead in 2016.
The Commercial Fraud Committee has had a very busy and prolific year, producing one book, two webinars, three newsletters, multiple case law eblasts, and the launching of a committee wide conference call program.
