Second Circuit Upholds Designation of Votes of Investor Seeking to Acquire Control and Prohibits “Gifting” in Plan of Reorganization

16 February 2011
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This client memo discusses the recent opinion issued by the Second Circuit Court of Appeals in In re DBSD North America, Inc. (1) affirming the Bankruptcy Court's designation of votes of an investor that purchased the senior secured debt of the debtor in furtherance of an "ulterior strategic motive" and (2) reversing the Bankruptcy Court's dismissal of a creditor's objection that the "gifting" in the proposed plan of reorganization violated the absolute priority rule.