In Re: BACHRACH CLOTHING, INC. BACHRACH CLOTHING, INC. v. EDGAR H. BACHRACH, et al.
Private equity fund Sun Capital purchased a 100+ year old family-owned retailer, financed the purchase through an LBO, ended up as the secured lender, and put the company in Chapter 11 less than 18 months later. After Sun obtained a covenant not to be sued, Debtor filed suit against its former shareholders, three siblings. Debtor sought avoidance of the sale and recovery of sale proceeds, alleging that the LBO was a fraudulent conveyance that rendered the Debtor insolvent or undercapitalized. After several days of trial and review of two expert valuation reports as well as thousands of pages of deposition testimony and other exhibits, the court entered judgment for the Defendants. The court declined to collapse the LBO, which would have been enough to end the lawsuit. The court then analyzed the expert reports, determining that it was not the sale that left the company insolvent or undercapitalized.