Bankruptcy & Financial Restructuring/Finance Advisory: Second Circuit Rejects Potential Loophole in the Securities Contract Safe Harbor

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The Second Circuit Court of Appeals recently held that the “safe harbor” protections for securities contracts in Section 546(e) of the Bankruptcy Code prevented individual creditors’ state law constructive fraudulent transfer claims against the former shareholders of Tribune Media Company for amounts received as part of a leveraged buyout (LBO). The Second Circuit specifically held that the creditors’ state law constructive fraudulent transfer claims were preempted by the securities contract safe harbor in the Bankruptcy Code, closing a potential loophole that individual creditors could use as a workaround to attack transactions that otherwise would be protected by the safe harbor.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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