![]() Possible criticisms of the proposed regime. Regime of ex ante review and detailing its implementation and procedure.įinally, it will detail some of the benefits of ex ante review and explore some It will thenĮxplore some of the problems with this current regime before proposing a new With an overview of current FTL and how it applies to LBOs. Problems with the current fraudulent transfer law (FTL) regime. This would substantially ameliorate many of the Way and by the same standards of financial distress used in the current regime,īut only at an earlier time. I propose that LBOs be analyzed in much the same This Note proposes a new solution: review LBOs forĭamage has already been done. Hindsight bias, free insurance for creditors, misaligned monitoring incentives,Īnd heavy litigation costs. Months or years after the transaction entails a number of problems, including In short, ex post review asks whether the buyout was doomed to fail from Such ex post review of buyouts seeks to determine whether,Īt the time of the transaction, the buyout left the target meeting any one of three Unwound as fraudulent transfers (sometimes called “fraudulentĬonveyances”). That eventually lead to bankruptcy may later be challenged and partially Precipitated or at least accelerated the failure of RJR Nabisco. 5Ĭommunity generally agrees that the massive debt load incurred in the LBO 4 In 2003, it announced it would cutįorty percent of its workforce and reduce its scope to just two brands. 2 After struggling to meet its debtĮventually broken up, and a large piece was sold off in 1999. The largest leveraged buyout (LBO) in history. Kravis bought RJR Nabisco for $24 billion, using $19 billion in debt guaranteed Indispensable critiques as a YLJ editor, and to Ryan McCartney for his I’m also deeply grateful to Matt Letten, who provided Thank Richard Squire, Ted Janger, and Roberta Romano for their assistance inĭeveloping my Note. Many difficulties inherent in the current regime.Īuthor. Proposed LBO by a neutral, third-party appraiser. Supplant constructive fraudulent transfer litigation: an ex ante review of the This Note proposes an alternative regime to ![]() Target long after the buyout and suffers from a number of practical, Protect the target’s creditors, requires a post-hoc valuation of the Current bankruptcy law, a leveraged buyout (LBO) that leaves an acquiredĬompany insolvent, undercapitalized, or unlikely to be able to pay back itsĭebts may be later avoided as a fraudulent transfer.
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