TOUSA involved one of the largest fraudulent transfer litigations in bankruptcy history. The Bankruptcy Court agreed with the Unsecured Creditors’ Committee that both the so-called “New Lenders” and the “Transeastern Lenders” received fraudulent transfers as part of a July 31, 2007 financing transaction. The District Court reversed in a scathing opinion, but today the 11th Circuit Court of Appeals has reversed the District Court and reinstated the Bankruptcy Court’s opinion in its entirety. The opinion can be found HERE. All that is left now is for the District Court to consider the issue of the remedies previously ordered by the Bankruptcy Court.

In a nutshell, TOUSA—a national homebuilder—incurred “rescue” first lien and second lien term debt in the aggregate amount of $500 million in July 31, 2007. The loans from the New Lenders were guaranteed by TOUSA’s subsidiaries and secured by the subsidiaries’ substantial assets. The proceeds of the loans were primarily used to repay approximately $421 million in debt incurred by as affiliate—Transeastern—whose debt had been guaranteed by TOUSA. The Bankruptcy Court issued an opinion of more than 180 pages concluding that the guarantees and collateral from TOUSA’s subsidiaries were not issued in exchange for “reasonably equivalent value” and, therefore, should be avoided as fraudulent transfers. The Bankruptcy Court also concluded that the fraudulent transfers were incurred “for the benefit of” the Transeastern Lenders, such that the $421 million (plus additional damages) should be recovered from the Transeastern Lenders as “transferees” of the fraudulent transfer.