2nd Circ.'s Take On LBOs Of Privately Held Securities

Law360, New York (August 7, 2013, 12:30 PM EDT) -- Section 546(e) of the Bankruptcy Code exempts “settlement payments” made by or to certain parties in connection with a “securities contract” from avoidance and recovery except in cases of actual fraud.

In April 2011, a Southern District of New York bankruptcy court held that a leveraged buyout of privately held stock would not be protected by this safe harbor provision unless there is evidence that unwinding the particular transaction would have an adverse effect on the financial markets as a whole. See Geltzer v. Mooney (In...
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