(sub/D-corp. issuing for parent/SH) likely guaranty” guaranty “Upstream YES fraudulent transfer C-lender $$ to SH, takes on SH’s stock/equity, AND D-corp. note/SI issues D-corp. does NOT receive (D-corp. does NOT get guaranty REV dividend from SH, ONLY other way around)… unless, pass-through of $$ from SH to D-corp. (as per Northern)… … OR, some which is tangible/quantifiable indirect benefit … management expertise of parent MAY be value, but NOT necessarily REV If IS then is extinguished if guaranty fraudulent transfer, guaranty collateralized, then such collateral is freed… AND, any payments made are recapturable … (sub issuing for other sub) MAYBE guaranty” guaranty fraudulent transfer? theory for Cross-corporate synergy indirect benefit “cross-stream guaranty”… Parent-corp. owns sub1 (manufacturing) AND sub2 (distribution) C-lender loans $$ to sub1, takes on sub1’s assets, AND sub2 note/SI issues guaranty… if sub1 is able to manufacture more goods, then sub2 is able to … distribute more goods questionable whether this is indirect benefit sufficient (in exchange for sub2’s liability from REV guaranty) Courts are mixed some courts look to received sub2 received actual benefit (whether benefit actually came into existence)… whereas, other courts look to that sub2 was likely to receive (even though NOT potential benefit received) Sub2 pays non-refundable commitment fee (in addition to guaranty) YES (NO if $$ never comes) fraudulent transfer actual benefit/REV Aircraft manufacturer pays for gas to incentivize buyer to later lease aircrafts NOT (even though buyer never fraudulent transfer leases aircrafts, YES b/c seemed good at the potential benefit/REV time) are usually on guaranties” continuing guaranties guaranty “Cross-stream all debts now owed OR hereafter incurred Assume sub2 issues in 2002… AND, guaranty” “cross-stream sub1’s is a sub2 files for bankruptcy in 2009… note “revolver” as per MAY have been continually guaranty … “revolver”, refreshed even though executed in 2002 (outside of SoL), guaranty
“Upstream guaranty” (sub/D-corp. issuing guaranty for parent/SH) likely YES fraudulent transfer C-lender $$ to SH, takes note/SI on SH’s stock/equity, AND D-corp. issues guaranty D-corp. does NOT receive REV (D-corp. does NOT get dividend from SH, ONLY other way around)… … unless, pass-through of $$ from SH to D-corp. (as per Northern)… … OR, some indirect benefit which is tangible/quantifiable management expertise of parent MAY be value, but NOT necessarily REV If guaranty IS fraudulent transfer, then guaranty is extinguished if collateralized, then such collateral is freed… … AND, any payments made are recapturable guaranty” (sub issuing guaranty for other sub) MAYBE fraudulent transfer? Cross-corporate synergy indirect benefit theory for “cross-stream guaranty”… Parent-corp. owns sub1 (manufacturing) AND sub2 (distribution) C-lender loans $$ to sub1, takes note/SI on sub1’s assets, AND sub2 issues guaranty… … if sub1 is able to manufacture more goods, then sub2 is able to distribute more goods questionable whether this indirect benefit is sufficient REV (in exchange for sub2’s liability from guaranty) Courts are mixed some courts look to actual benefit received sub2 received (whether benefit actually came into existence)… whereas, other courts look to potential benefit that sub2 was likely to receive (even though NOT received) Sub2 pays non-refundable commitment fee (in addition to guaranty) YES fraudulent transfer (NO actual benefit/REV if $$ never comes) Aircraft manufacturer pays for gas to incentivize buyer to later lease aircrafts NOT fraudulent transfer (even though buyer never leases aircrafts, YES potential benefit/REV b/c seemed good at the time) “Cross-stream guaranties” are usually continuing guaranties guaranty on all debts now owed OR hereafter incurred Assume sub2 issues “cross-stream guaranty” in 2002… AND, sub1’s note is a “revolver” sub2 files for bankruptcy in 2009… … as per “revolver”, guaranty MAY have been continually refreshed even though guaranty executed in 2002 (outside of SoL),
Bankruptcy_Schechter-Fall-2009.docx