Subject: Leveraged buyout and Fradulent Transfers.
-Shareholders sold their stock to Milhous for $3.5 M in cash plus $1.8 M in deferred payments. Milhous didn’t acquire the stock directly.
-Its subsidiary Nicole Plactics formed its own subsidiary, BPI Acquisition Corp.(“BPI”), to take ownership of the BP stock. Formally, the parties to the transaction were BPI and the selling shareholders. Milhous put no money into the purchase.
-Bay Plastics borrowed approximately $3.95 M from defendant BT Comm. Corp. and then caused Bay Plastics to direct that $3.5 M of the loan to be disbursed to BPI. BPI then paid the selling shareholders for their stock. Thus at closing, $3.5 M of the funds paid into escrow by BT went directly to the selling shareholders. BT received a first priority security interest in all the assets of Bay Plastics.
-BT received it all and nothing is left for the unsecureds. All of the debt except for $500k owed to BT was a result of the LBO. The shareholders knew about the financing.
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