Recent Developments in Acquisition Finance

January 05, 2017

Several recent court decisions will potentially impact the way equity sponsors handle certain matters regarding their portfolio company investments. The first is a decision of a New York bankruptcy court involving the right of a holder of distressed debt to credit-bid the full face amount of the debt in a bankruptcy auction, a right that may be especially important in the context of a loan-to-own acquisition strategy. The decision bucks the recent trend of decisions in the area and may prove helpful to those pursuing such a strategy. The second, a Delaware Chancery Court decision applying New York law, deals with instances in which the controlling affiliate of an entity, such as a sponsor in respect of its portfolio company, could potentially be found to be legally bound by the terms of a contract entered into by the portfolio company to which the sponsor is not a party.

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