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SunEdison Lenders Respond to Fraudulent Transfer Allegations

March 24, 2017, New York – Last month, many financial investment groups including Blackrock Financial Management Inc. and Citigroup Financial Products Inc., urged a New York bankruptcy court to dismiss fraud and other allegations launched against them by the bankrupt energy company’s official unsecured creditors committee. These second-lien lenders had loaned the debtor companies about $725 million in new financing and exchanged $336 million of outstanding unsecured notes for $225 million worth of senior secured convertible notes in January 2016. They are now accused of participating in fraudulent transfers that provided the lenders the benefit of gaining secured collateral just before SunEdison filed for Chapter 11 in April 2016. The unsecured creditor’s committee asserted that the alleged transfers benefitted those lenders at the expense of unsecured creditors, which were left with a diminished likelihood of recouping from SunEdison when it went bankrupt.

The second-lien lenders urged the court to reject the committee’s claims as the loan transactions were proper and not subject to avoidance because SunEdison received reasonably equivalent value in exchange for the liens.

SunEdison, which develops renewable energy products around the world, had filed for Chapter 11 protection in April 2016. Kobre & Kim LLP is representing the unsecured creditors’ committee and the law firm of Skadden Arps Slate Meagher & Flom LLP is representing SunEdison. The adversary case is Official Committee of Unsecured Creditors v. Wells Fargo Bank NA et al., case number 1:16-ap-01228 and the bankruptcy case is In re SunEdison Inc. et al., case number 1:16-bk-10992, both in the U.S. Bankruptcy Court for the Southern District of New York.