Intercorporate guaranties are commonly found in many financing deals, such as upstream, downstream, and cross-stream guaranties. Enforcement of guaranty obligations presents a risk the guaranty may be avoided for lack of consideration or as a fraudulent conveyance if the guarantor becomes a debtor in a bankruptcy case.
Also, when loan proceeds are designated for a specific use, as is often the case in leveraged buyouts, the borrower generally lacks control over the loaned funds. Thus, if the loan is challenged as a fraudulent transfer, then to establish the borrower received reasonably equivalent value from the loan, the lender often must show the borrower received other economic value from the loan transaction.
Bankruptcy Code Section 548's (or analogous state law’s) reasonably equivalent value inquiry provides a court some discretion in applying the rules and standards to the facts of the transaction.
Listen as an authoritative panel of finance practitioners and litigators, including Lowenstein partner Michael A. Kaplan, discusses the inherent risks in intercompany obligations of fraudulent conveyance avoidance actions, along with compelling arguments for the lender to establish economic value to the transaction to satisfy Section 548.
- Overview of types intercompany guaranties and integrated transactions at risk
- Fraudulent transfer analysis
- Timing of guaranty
- Reasonably equivalent value
- Financial condition of the guarantor
- Loans supported by intercorporate guaranties
- Integrated transactions and designated-use loans
- Best practices for lenders to establish a reasonably equivalent value
The panel will review these and other key issues:
- How do courts interpret "reasonably equivalent" value and will they consider indirect, intangible value?
- How have courts applied the single integrated transaction doctrine and what kinds of transactions are at risk for courts collapsing the transactions?
- What steps can lenders take to minimize insolvency related risks inherent in intercompany guaranties and other complex lending transactions?
- Michael A. Kaplan, Partner, Lowenstein Sandler LLP
- Lisa S. Bonsall, Partner, McCarter & English
- Alan J. Lipkin, Partner, Chaffetz Lindsey
Time: 1-2:30 p.m. ET
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