What is a Stalking Horse?
In the distressed M&A context, a stalking horse refers to a potential purchaser participating in a stalking horse auction who agrees to acquire the assets or business of an insolvent debtor as a going concern. In a stalking horse auction of an insolvent business, a preliminary bid by the stalking horse bidder is disclosed to the market and becomes the minimum bid, or floor price, that other parties can then outbid.
Introduction
Companies are habitually used as part of a corruption scheme. Such companies often have only a single director, or a small number of directors, and are beneficially owned by the wrong-doers.
Insolvency powers can be effective tools to obtain compensation for victims of fraud or corruption, in the right circumstances.
A state could, for example, apply to Court for a liquidator to be appointed over a company used for corruption.
When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. Under bankruptcy’s “absolute priority rule,” creditors generally must be paid in full before equity gets anything. That usually means that holders of equity, or claims treated as equity, get nothing.
A recent decision by the Bankruptcy Court for the Southern District of New York may enhance the ability of bankruptcy trustees and creditors committees to challenge allegedly fraudulent transfers that could qualify for protection under the “safe harbor” of section 546(e) of the Bankruptcy Code.
Risky Business. When a debtor is a licensee under a trademark license agreement, does it risk losing those license rights when it files bankruptcy? The question had not been answered in a Delaware bankruptcy case until Judge Kevin Gross recently addressed it in the In re Trump Entertainment Resorts, Inc. Chapter 11 case. A lot was riding on the decision, not just for the parties involved but, given how many Chapter 11 cases are filed in Delaware, more generally for other trademark licensees and owners as well.
Winding Down. If a corporation’s board of directors decides that the business needs to be wound down, there are a number of legal paths to consider. Determining the best approach is fact-dependent, and the corporation and its board should get legal advice before making a decision.
Recent decisions in the Ontario courts have brought this issue to the forefront, which is salient during this time of economic uncertainty for the oil industry and its related environmental obligations. The courts have had to focus on balancing competing public interests: those of creditors and the general health and safety of the public when a debtor has an outstanding obligation to remediate its pollution.
Under section 550(a) of the Bankruptcy Code, a trustee or debtor in possession may recover property (or its value) that has been fraudulently transferred “from the initial transferee or the entity for whose benefit the avoided transfer was made.” While the trustee’s right to recover from an initial transferee is absolute once a transfer is deemed fraudulent, a subsequent transferee may assert affirmative defenses that could prevent recovery by the estate of an otherwise avoidable transfer. As a result, defendants in fraudulent transfer litigations often take great pains to chara
The Financial Times has reported that Towergate, a loss making insurance broker with debts of up to £1bn, may be about to breach the terms of its loans. According to these reports, a paymentis due to Towergate’s secured creditors on Monday, 2nd February 2015, and another is due to its unsecured creditors two weeks later. These payments are reported to be worth about £30m. Towergate’s board is said to be weighing up rival restructuring bids this weekend, in an effort to save the business.