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Abstract: 

Although a backstopped rights offering can be a critical tool for successful chapter 11 exit financing, neither the Bankruptcy Code nor existing case law provides an express standard for approval of a rights offering or backstop agreement. In the absence of such a standard, it can be difficult to ascertain the likelihood of a challenge to these transactions until the debtor has already incurred significant resources and time. This article discusses certain risks and costs of prosecuting such a transaction that the debtor and other rights offering proponents should endeavor to consider, however difficult they may be to estimate.

Keywords: Backstop Agreements; Bank of America National Trust and Savings Association v. 203 North LaSalle Street Partnership; In re Peabody Energy Corporation

Affiliations:  1: Baker Botts LLP; 2: Baker Botts LLP.