Corinne Ball, with Jones Day. Courtesy photo Has the Seventh Circuit Opened the Door for Distressed Investors Through Limiting the Risk of Failed LBOs or Other Stock Sales?
In March, the Seventh Circuit held that the same safe harbor provisions in the Bankruptcy Code may also extend to leveraged acquisitions structured as a purchase of privately held stock.
April 24, 2024 at 10:00 AM
10 minute read
Mergers and Acquisitions
A signature element of many leveraged buyouts is that the target company incurs debt to effect the transaction while receiving limited benefit from the borrowing. The debt proceeds are used to pay the seller. Those characteristics set the stage in the event the leveraged buyout fails for creditors or their representative in bankruptcy to challenge the transaction and attempt to clawback the sale proceeds or, in bankruptcy vernacular, avoid the transfer.
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