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A Cautionary Tale for Lender Overreaching into Bankruptcy Remoteness

<b><i>In re Lexington Hospitality Group, LLC</b></i><p>Bankruptcy remote structures are often used to protect against the impact of default under a credit facility. A common mechanism is organizational documents requiring an outside director or member's vote to authorize a bankruptcy filing. However, the United States Bankruptcy Court for the Eastern District of Kentucky found that such a requirement implemented at the behest of a lender, among other bankruptcy restrictions, and where there was not true independence frustrated the important federal public policy of favoring fresh starts in bankruptcy.

10 minute read April 01, 2018 at 12:05 AM
By
Jeffrey S. Greenberg
A Cautionary Tale for Lender Overreaching into Bankruptcy Remoteness

Bankruptcy remote structures are often used to protect against the impact of default under a credit facility. A common mechanism is organizational documents requiring an outside director or member's vote to authorize a bankruptcy filing.

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