Fraudulent Conveyance Case Studies

Landmark Suit

The secured lender to a broadband communications business in Chapter 11 brought suit against the debtor, claiming that certain of its subsidiaries were effectively insolvent prior to its Chapter 11 filing and, therefore, were in default under its pre-petition credit agreement. The outcome of the landmark suit would determine the debtor’s ability to successfully reinstate the pre-petition secured debt and emerge from bankruptcy. AlixPartners was retained by counsel to the debtor to evaluate the merits of the secured lender’s claims and other expert testimony regarding the value and solvency of the debtor’s subsidiaries. Our expert testified in bankruptcy court regarding the solvency of the debtor’s subsidiaries at the relevant time periods. The judge ruled in favor of the debtor, which allowed the company to successfully emerge from Chapter 11.
 

Multi-Billion Dollar Transaction

In the context of a Chapter 11 reorganization, the Unsecured Creditors Committee of a media and entertainment company required assistance in evaluating the merits of a fraudulent conveyance that potentially occurred in connection with a multi-billion dollar transaction. As part of our role as financial advisors to the Committee, AlixPartners leveraged its extensive valuation and fraudulent conveyance experience to assist the Committee in understanding the different solvency tests, the work that was performed at the time of the transaction, and the sensitivity of key solvency drivers on the overall solvency conclusion. AlixPartners’ work was used by the Committee to evaluate the potential outcome of litigation, arguments made by adverse parties related to the merits of the alleged fraudulent conveyance, and settlement offers and recovery amounts to the members of the Committee contained in the plan of reorganization.

Attempted Fee Discovery

The Unsecured Creditors Committee of a satellite phone operator sought to recover $3.7 billion in fees paid to the operator for constructing the satellite network, arguing that the fees were a fraudulent conveyance. Our team of professionals was retained to evaluate the solvency of the operator under the three tests of solvency, and testified at trial to the solvency of the operator at the relevant time periods. The judge agreed with the testimony, citing significant market evidence in support of the conclusion, and ruled that the client did not have to repay any of the $3.7 billion in fees.

Leveraged Buyout

AlixPartners was retained as consulting advisors by a major law firm to assist in understanding and analyzing issues related to an alleged fraudulent conveyance arising from a leveraged buyout of a multi-billion dollar chemical company. AlixPartners quickly analyzed information obtained through discovery and from capital markets to assist the law firm in understanding the different solvency tests, the contemporaneous valuations prepared by third parties, and the impact on solvency of sensitizing key variables. AlixPartners’ work was utilized by the law firm in advising its client on the merits of the lawsuit as well as developing strategies for a potential settlement and further litigation.