Recent Developments in Acquisition Finance

February 05, 2019

Ninth Circuit Rejects Broad Disqualifications on Chapter 11 Voting of Purchased Claims

Those seeking to purchase assets or a business out of a Chapter 11 case employing a “loan to own” strategy may well have received a boost from a recent decision of the U.S. Court of Appeals for the Ninth Circuit. In In re Fagerdala, the Ninth Circuit Court of Appeals held that, for a creditor’s vote on a purchased claim in a Chapter 11 case to be disqualified by a bankruptcy court on the basis of bad faith, the creditor must be intending to obtain for itself some unfair advantage over other creditors for an improper motive unrelated to protecting another claim it owns in the case. 

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