Replies to post #2359 on Trident Microsystems, Inc.(fka TRIDQ)

[eighty]

if judge decides for equity, more money to come through settlement?

[eastunder]

What are Avoidance Actions?

Avoidance Actions are brought in a bankruptcy proceeding against corporations and individuals who have received payment from a bankrupt debtor. There are primarily two types of Avoidance Actions: Preference Actions and Fraudulent Transfer Actions.


Preference Actions and Preferential Transfers.

Bankruptcy Code section 547 empowers the debtor to avoid certain transfers made during the 90-day period (one year if the transferee was an insider) immediately before the commencement of a bankruptcy case. A lawsuit initiated to avoid such payments is called a “preference action.” The theory behind such actions is that the debtor was already insolvent at the time the payments were made and the payments therefore give preferential treatment to certain creditors over others - hence the names “preferential transfers” and “preference actions.”

Preference actions are often confusing to defendants who wonder, “why do I need to repay money I rightfully earned?” The answer is that you don’t necessarily have to return a single penny. If you have been sued in a preference action, there are several defenses you can assert. First and most obviously, you could demonstrate that at the time the alleged preferential transfer was made, the debtor was not insolvent. In addition, Bankruptcy Code section 547(c) provides several defenses, including:
•The transfer was intended to be and was in fact a “contemporaneous” (simultaneous) exchange for new value given to the debtor.
•The payment was for a debt incurred in the ordinary course of business and was made in the ordinary course of business and pursuant to the ordinary business terms of the industry.
•The transferee provided the debtor with “new value,” usually in the form of goods, after the “preferential” transfer was made.

Fraudulent Transfers.

A “fraudulent transfer” is any transfer or obligation made within two years prior to filing for bankruptcy with the actual intent to hinder, delay, or defraud a present or future creditor. Under section 548 of the Bankruptcy Code, the debtor may avoid fraudulent transfers and recover any property of the estate that was fraudulently conveyed to a third party. In the absence of fraudulent intent, a transfer may still be avoidable as “constructively fraudulent” under both the Bankruptcy Code and applicable state law if such transfer was made in exchange for less than reasonably equivalent value and (i) the debtor was insolvent at the time of the transfer, (ii) the debtor was rendered insolvent as a result of the transfer, or (iii) the transfer was made to an insider of the debtor.

[eastunder]

10. The Auction was conducted on February 23 and 24, 2012. At the
conclusion of the Auction and competitive bidding, the Debtors declared Entropic the
highest and best bidder based on its bid of $65 million (the “Entropic APA”) for the
acquisition of the STB Business, including all avoidance actions related to the STB
Business under Bankruptcy Code sections 544, 547, 548, 549 and 550 (the “STB
Avoidance Actions”).

11. The STB Avoidance Actions include (i) potential preference claims
against vendors, including NXP Semiconductorswhich received over $161 million in
payments from TMFE in the one year prior to the Petition Date, (ii) possible fraudulent
transfer actions that may exist, including potential fraudulent transfer claims against NXP
that may be related to the NXP Acquisition or the provision of goods and services under
certain agreements known as the Manufacturing Services Agreement (“MSA”) and the
Transition Services Agreement (“TSA”), and (iii) possible claims under section 549 for
return of unauthorized postpetition transfers.
6

12. Notwithstanding this Court’s $2 million limitation on the payment of
“Critical Vendor” claims [D.I. 128], the Equity Committee has been informed by the
Debtors’ professionals that well over $10 million has been paid postpetition to NXP by
the Debtors and certain non-Debtor affiliates. Further, it is estimated that post-petition
payments to NXP (including cure costs) are expected to exceed $35 million through April
2012, a substantial amount of which, based upon information and belief, is on account of
prepetition debt. The ability to review certain post-petition transactions under section
549 of the Bankruptcy Code is being sold to Entropic arguably releasing any such
claims the Debtors may have on account of such post-petition transfers.

NXP: SMELLING LIKE A ROSE

It's too bad they can't make them just return all that. Added all together that will be 196M paid to NXP during the same year TQNT filed for BK! WOW!

That's amazing, imho.