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Unraveling Financing Transactions under Fraudulent Conveyance Laws: The Lessons of In re TOUSA, Inc.
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November 5, 2009
Previously published on November 2, 2009
Lenders are often counseled about fraudulent conveyance risks when they engage in financing transactions. It is usual, customary and the norm for steps to be taken to attempt to reduce such risks, including obtaining solvency and fairness opinions and using so-called savings clauses in loan documents. These undertakings and features notwithstanding, when a borrower or guarantor files a chapter 11 petition, often fraudulent conveyance claims are threatened, used as leverage, and settled within the context of a plan of reorganization. Owing to the complexity and fact intensive nature of such claims, the expense of litigation, and uncertainties of outcome inherent in any litigation, it is rare that such claims are litigated to conclusion. The case of Official Committee of Unsecured Creditors of TOUSA, Inc. v. Citicorp North America, Inc. (In re TOUSA, Inc.), however, was fully litigated to judgment.
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The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance. |
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