Orrick Restructuring Alert: Lessons for Lenders from Tousa Circuit Court Decision

This alert, written by Raniero D’Aversa, Jonathan Guy and Amy Pasacreta, discusses the bankruptcy case of TOUSA, Inc. and its various subsidiaries is one where lenders have seen their fortunes rise and fall. On March 15, 2012, they fell again when the Eleventh Circuit reversed the District Court’s opinion and reinstated the Bankruptcy Court’s order, which had disgorged over $400 million from Tousa’s senior lenders and avoided certain guarantees and liens granted to them by the Conveying Subsidiaries. Specifically, the Circuit Court found: (i) the Tousa Bankruptcy Court did not err when it found the Conveying Subsidiaries did not receive reasonably equivalent value in exchange for the new liens provided to the New Lenders; and (ii) the Transeastern Lenders were the direct beneficiaries of the new liens and as such subject to the avoidance powers of section 550(a). Click here to read more.