In part one of our series on recharacterization, we discussed the elements of judicial recharacterization of loans as equity interests.[i] In part two of the series, we considered how debtors can “claw back” putative “loans” that they may have repaid years earlier because the “loans” were in fact equity investments and their repayment was invalid.[ii] […]
In our last article[i], we discussed the judicial recharacterization of loans as equity interests. As we described, a court will recharacterize a lender’s debt claim as equity if it determines the “loan” actually was intended to be, and was treated by the parties as, an equity investment. Recharacterization is a powerful tool for creditors and […]
In bankruptcy, a debt claim has a higher priority than an equity interest (or share) in the debtor company, and should be (and ordinarily is) paid in full before equityholders receive any distribution from the debtor. Better, then, to acquire or hold a debt claim — an elegant swan — than to hold an equity […]
The mere act of filing a chapter 11 bankruptcy petition significantly alters the relationship between a debtor and its creditors, yet, perhaps surprisingly, the filing does not automatically trigger removal of the very management team that led (or maybe drove) the debtor into bankruptcy in the first place. Why? Because, in enacting the Bankruptcy Code, […]
Investing in bankruptcy claims (i.e., claims of creditors against bankruptcy debtors) can be very profitable or can result in a significant, or even total, loss. Bankruptcy claims are classified in chapter 11 plans of reorganization according to their relative rights against the debtor. The recovery of a given class of claims will depend on the […]
Are you confused where to file bankruptcy? Why file a bankruptcy case here instead of there? An entity, and moreso a group of entities, may be legally permitted to file for bankruptcy in any one of a number of judicial districts – also referred to as venues. A prospective debtor should carefully consider where to […]