Menswear Fashions, Inc. (MFI) was a family-owned apparel company that was acquired in February 2005 through a leveraged buyout (LBO) led by Sycamore Partners, a private equity firm that specializes in distressed investments.1 An LBO is an acquisition in which the new owners add substantial debt to the company's balance sheet. The $8 million purchase price was funded with a $2 million equity investment from Sycamore Partners for MFI's outstanding common stock, $2 million in secured lending secured by certain assets, and a new $4 million loan from the former (pre-LBO) equity owners, secured by the remaining assets of MFI.2 Before the buyout, MFI had no long-term debt. MFI filed for Chapter 11 bankruptcy 1 years after the LBO was completed. When LBOs fail, it is common for the company to sue the secured lenders financing the buyout and/or the old owners who sold their stock, arguing that the LBO was a "fraudulent transfer". The basic idea behind fraudulent transfer is that the company engaged in a transfer in which the corporation gave away more than it got, at a time when the company was in a financially shaky position. The debtor (the company that eventually files for bankruptcy)