Enter to open, tab to navigate, enter to select
Representing Private Equity Sponsors in Bankruptcy Toolkit
Practical Law Toolkit w-002-9718 (Approx. 9 pages)
Representing Private Equity Sponsors in Bankruptcy Toolkit
by Practical Law Bankruptcy & Restructuring
| Maintained • USA (National/Federal) |
Resources concerning strategies, timelines, overviews, and in-depth analysis of issues involving the representation of private equity sponsors before and during bankruptcy proceedings.
Private equity sponsors should develop strategies and be aware of the benefits and risks of investing in financially troubled companies. The acquisition of an interest in a distressed company in or outside of bankruptcy involves many complex legal issues that must be considered in evaluating these investments. These issues include:
- Fiduciary duties of directors and officers.
- Fraudulent conveyance risks posed by common business transactions, such as:
- leveraged buyouts (LBOs);
- intercorporate guaranties in loans to corporate groups; and
- Protection from avoidance under the safe harbor provisions of section 546(e) of the Bankruptcy Code.
- Risk of having debt claims recharacterized as equity or votes designated as disallowed claims for purposes of voting on a Chapter 11 plan.
- Ability to obtain a third-party release under a Chapter 11 plan or Rule 9019 settlement.
- Out-of court restructuring alternatives.
- Acquiring or retaining equity through a rights offering or debt for equity exchange under a Chapter 11 plan.
- Providing DIP financing.
- Negotiating a prepackaged bankruptcy or lock-up agreement.
- Liquidating under Chapter 11.
This Toolkit contains continuously maintained practice notes, checklists, and standard documents to help develop strategies to protect a private equity sponsor's interests both before and during a bankruptcy proceeding. For a toolkit of resources addressing out-of-court alternatives, see Out-of-Court Restructuring and Liquidation Alternatives Toolkit.