Late last year, in the Tousa bankruptcy case, the US
Bankruptcy Court for the Southern District of Florida struck
down fraudulent transfer savings clauses as unenforceable.
These clauses are intended to allow subsidiaries, and other
affiliates of a borrower, to provide credit support such as
guarantees or grants of security interests for the borrower's
In Tousa, certain subsidiaries of the parent company granted
security interests in their assets to secure debt that the
parent company incurred under its $500 million of first and
second lien syndicated term loan facilities. The parent used
over $420 million of the proceeds of that debt to settle
ongoing litigation between the parent and another group of
unsecured lenders in an unrelated lending transaction that did
not involve the subsidiaries and for which they provided no
credit support. The subsidiaries were not defendants in the
Unlike many European and other jurisdictions, the US...