How has the Tousa Bankruptcy Court Decision and Other Recent Cases Created New Concerns for Secured Lenders?
Secured Lender, The › Vol. 66 Nbr. 8, November 2010
Linked as:
Summary
Last October, the US Bankruptcy Court in Florida issued a significant decision in the Chapter 11 proceeding for homebuilder Tousa Inc, which sent a clear message to secured lenders. Other recent rulings in bankruptcy courts around the country have confirmed that message: Secured lenders need to ensure the financial health of their borrowers. In the Tribune Co bankruptcy, a court-appointed examiner concluded that fraud played a part in the company's 2007 leveraged buyout, which put real estate tycoon Sam Zell in control of both the Chicago Tribune and Los Angeles Times and thus constituted a fraudulent transfer. In the Yellowstone Mountain Club bankruptcy case, the judge ruled against the secured lenders on an equitable subordination claim. The key items the judge cited in his decision were that the lenders did not independently verify projections, did not properly appraise the assets and did not conduct sufficient due diligence to ensure that the entity would be able to repay the massive debt.
See the full content of this document
Extract
How has the Tousa Bankruptcy Court Decision and Other Recent Cases Created New Concerns for Secured Lenders?
Last October, the United States Bankruptcy Court in Florida issued a significant decision in the Chapter 11 proceeding for homebuilder Tousa, Inc. (Tousa),1 which sent a clear message to secured lenders Other recent rulings in bankruptcy courts around the country have confirmed that message: Secured lenders need to ensure the financial health of their borrowers.
Case BackgroundTousa was a large residential land developer and homebuilder in the southeastern United States. In 2005, it created a joint venture to acquire certain homebuilding assets of Transeastern Properties. The venture was financed with $675 million in third-party debt, which Tousa and a subsidiary guaranteed. In 2006, the joint venture defaulted on the debt and in July 2007 T...See the full content of this document
Sponsored links
