August 22, 2011
Delaware Decision on Restructurings
Here’s news from Potter Anderson’s John Grossbauer: Recently, Delaware Vice Chancellor Parsons delivered this opinion – in Roseton OL, LLC v. Dynegy Holdings – declining to enjoin the restructuring of Dynegy Holdings on the grounds that it violated a transfer restriction in a parent company guarantee in a sale-leaseback transaction or, alternatively, constituted a fraudulent conveyance. The court discusses the narrow scope of the guarantee as drafted, focusing on the language prohibiting transfer by Dynegy of “its” assets, which did not occur in the case of the challenged internal restructuring. Also, because the assets that were transferred were transferred into bankruptcy remote subsidiaries, from which Dynegy would continue to receive dividends, and not outside the Dynegy corporate structure, the court found the applicable fraudulent conveyance tests were not met.