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The Bankruptcy StrategistLJN NewslettersNewsSections

Inequitable Subordination?

By Dion W. Hayes and Aaron G. McCollough
January 03, 2006

In an article in last month's issue, we questioned the desirability of equitably subordinating or disallowing claims transferred post-petition, and explored the implications that a decision pending in the Enron bankruptcy court might have on distressed debt markets. Now, in an expansively reasoned opinion, the Enron court partially answered those questions. The court denied a motion to dismiss certain counts seeking to equitably subordinate certain bank claims in the hands of post-petition assignees on the basis of allegedly inequitable prepetition conduct engaged in by Enron's pre-petition lenders.

Alarming Decision

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