In order to mitigate the effects of a cascade of deal-by-deal and make them more attractive to private equity managers, private equity funds using a U.S. cascade may include a clawback clause in their LPAs.  Before the waterfall, the amount distributed is distributed among the fund partners. Partners include both GP and LP. The amount distributed to the family doctor is kept by the family doctor, while the amount distributed to each LP then passes through the waterfall and is redistributed between the GP and the LP. The recent decision of the Supreme Court of the Landesbank Hessen-Theringen Girozentrale, in particular against the Bayerische Landesbank London Branch, is a useful reminder of the need to be careful in the development of loan contracts in which a party must play several roles and to clearly state where each creditor should be registered in the case of payment water. A cascading structure can be presented as a series of buckets or phases. Each bucket contains its own attribution method. When the bucket is full, the capital will go to the next bucket. The first buckets are generally entirely attributed to LPs, while buckets further from the source are more advantageous to the family doctor. This structure is designed to encourage the partner to maximize the fund`s return.
Similarly, the distributions were not made from assets on which the creditors held wagers, but from assets created by the plan on which the creditors did not hold wagers. Section 552 (a) provides that assets acquired after bankruptcy are generally not « subject to a pledge » arising from a previous agreement. 11 U.S.C 552 a). On June 19, 2019, the United States Court of Appeals for the Third Circuit issued a notice in Delaware Trust Company v. Morgan Stanley Capital Group, Inc., Wilmington Trust, N.A. (In re Energy Future Holdings Corp.), in which it considered the allocation of assets in accordance with the cascading provision of intercretion in a chapter 11 reorganization. In a critical but not unprecedented case, the Court found that the borrowing agreement between two groups of bondholders with the same guarantees did not apply to distributions under the recovery plan, applying the specific language of the waterfall regime under the borrowing agreement.