As this column has noted previously, courts have applied increasingly expansive
readings of Section 546(e) of the U.S.
Bankruptcy Code to shield virtually all
transactions that concern a purported
transfer of securities, both public
and private, from avoidance for the
benefit of creditors. As a result, the
limit of the types of transactions that
otherwise would be avoidable as
preferences or constructively fraudulent
conveyances, but that now may
come under the ambit of the Section
546(e) safe harbor, is far from clear.
This uncertainty has led parties in
some bankruptcy proceedings to
undertake creative measures in an
effort to steer clear of the potentially
harsh impact of Section 546(e) on
potential avenues for creditor recovery
from fraudulent conveyance litigation.
The In re Lyondell Chemical case
(Case. No. 09-10023 (REG)) (Bankr.
S.D.N. Y.) provides one such example.
Lyondell’s bankruptcy proceeding
was precipitated by the company’s
2007 acquisition by Basell AF S.C.A.,
a transaction in which Lyondell’s
numerous public shareholders received
about $12.5 billion in aggregate
consideration. The costs associated
with the “going private” transaction
resulted in a severely undercapitalized
and highly leveraged company
that was ill-equipped to handle the
onslaught of the Great Recession.
The company began preparing for
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