Certain recent legal developments will likely impact acquisition finance. This article will survey some of the more notable ones.

We discussed in the last newsletter the Eleventh Circuit Court of Appeals’ decision in In re Tousa, in which he court affirmed a bankruptcy court decision ordering the return of more than $400 million that had been repaid to prior lenders of a parent company in connection with a subsequent secured financing to the parentand its subsidiaries. Among the key elements of the decision were findings that the subsequent financing was a fraudulent transfer in respect of the subsidiaries not obligated on the loan to the parent entity repaid with the proceeds of the financing, and that various of these subsidiaries were or became insolvent at the time of such financing, despite representations and opinions as to their solvency given at the time.

A recent decision of a U.S. District Court in Indiana highlights some of the risks stemming from Tousa in the acquisition finance context, particularly for leveraged buyout financing.