In re Resorts International, Inc.: Third Circuit Effectively Bars Application of Fraudulent Conveyance Statute to Payments to Public Shareholders in Leveraged Buyouts
On June 30, 1999, the United States Court of Appeals for the Third Circuit held that payments to shareholders in a leveraged buyout (“LBO”) of a public company that passed through financial intermediaries were not recoverable as fraudulent conveyances. With this decision, the court substantially curtails the scope of the bankruptcy estate’s avoidance powers in cases involving failed LBOs.