James Moody, Trustee of the Estate of Jeannette Corporation and the Committee of Unsecured Creditors of Jeannette Corporation v. Security Pacific Business Credit, Inc., the Coca-Cola Bottling Company of New York, Inc., Kny Development Corp., J. Corp., John P. Brogan, John J. Brogan, Hanley Dawson, Iii, James A. McLean James R. Winoker, Robert M. Janowiak, Alan MacLachlan Interdyne, Inc., Muench-Kreuzer Candle Company v. Frank W. Storey, Calvin MacCraken Individuals, James Moody, Trustee of the Estate of Jeannette Corporation

This bankruptcy case requires us to address, once again, the application of the fraudulent conveyance laws to a failed leveraged buyout. In United States v. Tabor Court Realty Corp., 803 F.2d 1288, 1297 (3d Cir.1986), cert. denied sub nom. McClellan Realty Corp. v. United States, 483 U.S. 1005, 107 S.Ct. 3229, 97 L.Ed.2d 735 (1987), we established that the Pennsylvania Uniform Fraudulent Conveyance Act (UFCA) extends to leveraged buyouts. This case raises several questions about the application of this Act to the failed leveraged buyout of Jeannette Corporation.

On July 31, 1981, a group of investors acquired Jeannette in a leveraged buyout. Less than a year and a half later, Jeannette, which had been profitable for many years, was forced into bankruptcy. The bankruptcy trustee brought this action to set aside the advances made and obligations incurred in connection with the acquisition. The trustee alleges that the leveraged buyout constitutes a fraudulent conveyance under the UFCA and is voidable under the Bankruptcy Code. After a bench trial, the district court entered judgment for defendants. Moody v. Security Pac. Business Credit, Inc., 127 B.R. 958 (W.D.Pa.1991). We will affirm.

* A

Founded in 1898, Jeannette Corporation manufactured and sold glass, ceramic, china, plastic, and candle houseware products in the United States and Canada.1 For many years, Jeannette was a profitable enterprise. From 1965 to 1978, its annual net sales grew on a consolidated basis from $9.6 million to $61.7 million and its annual gross profit margin ranged from 18% to 32.9%. In each of those years, Jeannette earned a net profit. From 1975 to 1977, Jeannette's sales increased annually by 16%. Its consolidated pre-tax profit was $3.4 million in 1977 and $6.1 million in 1978.

In 1978, the Coca-Cola Bottling Company of New York, Inc. acquired Jeannette for $39.6 million. Shortly thereafter, Coca-Cola increased the total net book value of Jeannette's property, plant, and equipment (PP & E) by $5.7 million after a manufacturer's appraisal valued these assets at $29 million. From 1978 to 1981, Coca-Cola invested $6 million in Jeannette for capital expenditures, and $5 million for maintenance and repair of its physical plant.

At first, Jeannette was not as profitable under Coca-Cola's ownership. It suffered a consolidated $5 million pre-tax loss in 1979, in part because of the adoption of new valuation procedures for inventory, and net sales fell by $4 million. However, Jeannette's performance rebounded in 1980. Net sales increased by $9 million and the company's gross profit margin doubled. Although 1980 was a break-even year before recognition of acquisition costs, Jeannette reported a $1.3 million pre-tax profit and had a $3 million positive cash flow.

Jeannette projected that this trend would continue into 1981. Although Jeannette had an operating loss of $1.1 million in the first half of 1981, because its business cycle produced stronger cash flows in the latter half of the year, the company projected a pre-tax profit of $500,000 before interest expenses.

In late 1979, Coca-Cola decided to sell Jeannette and focus attention on its core bottling business. In June 1981, John P. Brogan expressed an interest in acquiring Jeannette. Brogan was affiliated with a small group of investors in the business of acquiring companies through leveraged buyouts, the hallmark feature of which is the exchange of equity for debt.2 On July 22, 1981, Coca-Cola agreed to sell Jeannette for $12.1 million on condition that Brogan complete the transaction by the end of the month.

Brogan contacted Security Pacific Business Credit Inc., a lending group that had financed one of his prior acquisitions, about obtaining financing. He submitted one year of monthly projections, based in large part on Jeannette's 80-page business plan for 1981, which showed that Jeannette would have sufficient working capital under the proposed financing arrangement in the year following the acquisition. Before agreeing to finance the transaction, however, Security Pacific undertook its own investigation of Jeannette.

Security Pacific assigned this task to credit analyst Stephen Ngan. Based on his discussions with Jeannette personnel and a review of the company's financial records, Ngan made his own set of projections. He concluded that Jeannette would earn a pre-tax profit of $800,000 after interest expenses in its first year of operation, and recommended that Security Pacific finance the acquisition. He thought Jeannette was a "well-established" company with "a good track record for growth and earnings."

After reviewing Ngan's recommendation, together with an inventory report, the 1978 appraisal of Jeannette's PP & E, Brogan's projections, and a 55-page report on Jeannette prepared by another bank, Security Pacific decided to finance the acquisition. At that point, Coca-Cola formally approved the sale of Jeannette to J. Corp., which had been incorporated for the purpose of acquiring Jeannette.

The acquisition of Jeannette was consummated on July 31, 1981. J. Corp. purchased Jeannette with funds from a $15.5 million line of credit Security Pacific extended Jeannette secured by first lien security interests on all Jeannette's assets. J. Corp. never repaid Jeannette any portion of, or executed a promissory note for, the amount ($11.7 million) Security Pacific initially forwarded to J. Corp. on behalf of Jeannette to finance the acquisition. Other than new management, the only benefit Jeannette received was access to credit from Security Pacific.3

As with most leveraged buyouts, the acquisition left Jeannette's assets fully encumbered by the security interests held by Security Pacific. Jeannette could not dispose of its assets, except in the ordinary course of business, without the consent of Security Pacific, and was prohibited from granting security interests to anyone else. As a result, Jeannette's sole source of working capital after the transaction was its line of credit with Security Pacific.

Although Jeannette's total outstanding balance never exceeded the amount of the initial advance ($11.7 million), the total credit advanced Jeannette was many times this amount because of the "revolving" nature of its line of credit with Security Pacific. Jeannette's accounts receivable were forwarded to Security Pacific by way of the Mellon Bank, and were credited against its outstanding loan balance. As this balance was paid down, more credit was made available, which Jeannette drew on to finance operations and generate sales.

Although the initial advance was payable on demand, Jeannette carried this obligation as long-term debt. This reflected the parties' understanding that the transaction would give rise to a long-term lending relationship in which the balance on the revolving credit facility would be paid down over several years. Security Pacific obtained no up-front fees and stood to profit by earning interest on the line of credit at 3 1/4% above prime (at that time about 20%).

Jeannette operated as a going concern from the latter half of 1981 into 1982. From August through December 1981, its net sales exceeded $31 million and the company realized a $6 million gross profit. During the same period, Jeannette had a positive cash flow of $3 million. Part of Jeannette's success during this period is attributable to its business cycle, which produced stronger cash flows in the latter half of the year.

By the end of 1981, Jeannette had received over $43 million in credit advances from Security Pacific, and had $4 million of available credit. A year after the leveraged buyout Jeannette had received $77 million in advances, and had $2.3 million in available credit. Jeannette never exhausted its credit and Security Pacific never refused a request for funds, although on several occasions it suggested that Jeannette withdraw smaller amounts.

Although Jeannette's performance initially tracked expectations, its financial condition deteriorated steadily in 1982. Jeannette experienced a shrinking domestic glassware market, a marked increase in foreign competition, dramatic price slashing and inventory dumping by its domestic competitors, and a continued nationwide recession. In January 1982, orders for Jeannette products fell to 86% of projected levels and in February orders fell to 70%. This decline in sales constricted cash flow and contributed to an inventory build-up.

Jeannette responded by reducing production and lengthening its accounts payable schedule. From late 1981 to early 1982, the company extended its payment period from 30 days to 45 days and then to 60 days. In late February (or early March) 1982, it invoked an 88-day period. However, it remained unable to pay its creditors in a timely fashion. In March 1982, Jeannette was forced to shut down one of the three glass tanks at its Jeannette Glass division, and, in late July, it shut down another. Shortly thereafter, Jeannette sold the inventory and fixed assets of its Old Harbor subsidiary for $2 million. In August 1982, the last tank was shut down at the Jeannette Glass division, bringing operations there to a halt.

Still, Jeannette's financial condition deteriorated. By August 1982, sales had fallen to 69% of traditional levels, and by October sales were 44% of 1981 levels. On October 4, 1982, an involuntary bankruptcy petition was filed under Chapter 7 of the Bankruptcy Code.4 Jeannette's trade creditors filed $2.5 million in proof of claims, over 90% for goods or services provided after June 1982, none for goods or services supplied before the leveraged buyout.

In November 1982, Jeannette sold the assets of its Brookpark division for $1.1 million in cash and notes and the assumption of $62,000 of liabilities. Jeannette's Royal China subsidiary was placed in bankruptcy in 1983, and, a year later, its operating assets were sold for $4.2 million and the assumption of liabilities. Finally, in September 1983, Jeannette's remaining assets were auctioned off for $2.15 million.

On September 22, 1983, plaintiff James Moody, the trustee of the bankruptcy estate of Jeannette, filed this action in federal district court against defendants Security Pacific, Coca-Cola, KNY Development, J. Corp., M-K Candle, Brogan, and other individuals. He alleges that the leveraged buyout constitutes a fraudulent conveyance under the UFCA, 39 Pa.Cons.Stat.Ann. § § 354-57, and is voidable under § 544(b) of the Bankruptcy Code, 11 U.S.C. § 544(b).5 After a bench trial, the district court made findings of fact and conclusions of law and entered judgment for defendants.

According to the district court, the leveraged buyout was not intentionally fraudulent because it was "abundantly clear" that defendants expected the transaction to succeed and hoped to profit from it. Moody, 127 B.R. at 990. Likewise, although the leveraged buyout was made for less than fair consideration to Jeannette, the district court held that it was not constructively fraudulent.

Because the leveraged buyout was made for less than fair consideration, the district court placed on defendants the burden of proving solvency by clear and convincing evidence. Id. at 992-93. The court, however, concluded that defendants met this burden. Jeannette was not rendered insolvent in the "bankruptcy sense" because the "present fair salable value" of Jeannette's assets immediately after the leveraged buyout exceeded total liabilities by at least $1-2 million. Id. at 995. In making this determination, the district court valued assets on a going concern basis. Id.

Nor was Jeannette rendered insolvent in the "equity sense" or left with an unreasonably small capital. Id. at 996. Based on the parties' projections, which it found "reasonable and prudent when made," and the availability on Jeannette's line of credit with Security Pacific, the district court found that Jeannette was not left with an unreasonably small capital after the acquisition. Id. at 984. Rather than a lack of capital, the district court attributed Jeannette's demise to intense foreign and domestic competition, a continued recession, and, to a lesser degree, mismanagement, which led to a drastic decline in sales beginning in early 1982. Id. at 989.

After entry of judgment, plaintiff moved for final judgment under Fed.R.Civ.P. 54(b), which the district court granted. This appeal followed.

We have jurisdiction under 28 U.S.C. § 1291. The principal question is whether the leveraged buyout of Jeannette constitutes a fraudulent conveyance under the UFCA. In deciding this question, we must address whether the leveraged buyout was made for less than fair consideration to Jeannette; whether the leveraged buyout either rendered Jeannette insolvent or left it with an unreasonably small capital; and whether defendants entered into the leveraged buyout with an intent to defraud creditors of Jeannette.

Our review of the district court's interpretation and construction of the UFCA is plenary. Voest-Alpine Trading USA Corp. v. Vantage Steel Corp., 919 F.2d 206, 211 (3d Cir.1990). In applying the UFCA, we are bound by Pennsylvania law. United States v. Gleneagles Inv. Co., 565 F.Supp. 556, 573 (M.D.Pa.1983), aff'd in part and vacated in part sub nom. United States v. Tabor Court Realty Corp., 803 F.2d 1288 (3d Cir.1986), cert. denied sub nom. McClellan Realty Corp. v. United States, 483 U.S. 1005, 107 S.Ct. 3229, 97 L.Ed.2d 735 (1987). Where Pennsylvania law is silent, we may look to the law in other jurisdictions that have adopted the UFCA, id. (citing 39 Pa.Stat.Ann. § 362), and decisions construing analogous provisions of the Bankruptcy Code, Tabor Court Realty Corp., 803 F.2d at 1298-99.

We review the district court's findings of fact under the clearly erroneous standard, Voest-Alpine Trading USA Corp., 919 F.2d at 211, and will accept these findings unless they are "completely devoid of a credible evidentiary basis or bear[ ] no rational relationship to the supporting data," American Home Prods. Corp. v. Barr Lab., Inc., 834 F.2d 368, 371 (3d Cir.1987). "In Pennsylvania, the existence of actual intent is a question of fact." Tabor Court Realty Corp., 803 F.2d at 1304. The question of fair consideration is also a question of fact.

We review whether the leveraged buyout rendered Jeannette insolvent as a mixed question of law and fact. Id. at 1303. We review the findings underlying the district court's solvency analysis, including the values it assigned to particular items of Jeannette's PP & E, under the clearly erroneous standard. However, our review of the district court's application of the UFCA to these findings, including its decision to value Jeannette's assets on a going concern basis, is plenary.

Likewise, adequacy of capital presents a mixed question of law and fact. Our review whether the district court properly considered availability of credit in determining whether the leveraged buyout left Jeannette with an unreasonably small capital is plenary. However, we review the findings underlying its adequacy of capital analysis under the clearly erroneous standard. See Barrett v. Continental Ill. Nat'l Bank & Trust, 882 F.2d 1, 4 (1st Cir.1989), cert. denied, 494 U.S. 1028, 110 S.Ct. 1476, 108 L.Ed.2d 613 (1990).

* The UFCA proscribes both intentional and constructive fraud. Under the Act's intentional fraud provisions, any conveyance made or obligation incurred either without fair consideration by one who "intends or believes that he will incur debts beyond his ability to pay as they mature," 39 Pa.Stat.Ann. § 356,6 or with an "actual intent ... to hinder, delay, or defraud ... creditors" is fraudulent, id. § 357.7 Actual intent to defraud may be inferred from the circumstances surrounding a transfer. Tabor Court Realty Corp., 803 F.2d at 1304-05.

The UFCA's constructive fraud provisions operate without regard to intent. Under § 4, any conveyance made or obligation incurred "by a person who is or will be thereby rendered insolvent" is fraudulent if it is made or incurred for less than fair consideration. 39 Pa.Stat.Ann. § 354.8 Insolvency has two components under Pennsylvania law: insolvency in the "bankruptcy sense" (a deficit net worth immediately after the conveyance), and insolvency in the "equity sense" (an inability to pay debts as they mature). Larrimer v. Feeney, 411 Pa. 604, 192 A.2d 351, 353 (1963). Fair consideration requires a "good faith" exchange of "a fair equivalent." 39 Pa.Stat.Ann. § 353(a).

Under § 5, any conveyance made or obligation incurred by a person engaged in "a business or transaction" is fraudulent if it is made or incurred without fair consideration and leaves that person with an "unreasonably small capital." Id. § 355.9 The relationship between "insolvency" under § 4 of the UFCA and "unreasonably small capital" under § 5 is not clear. However, as we discuss below, the better view would seem to be that "unreasonably small capital" denotes a financial condition short of equitable insolvency. The UFCA's constructive fraud provisions furnish a standard of causation that attempts to link the challenged conveyance with the debtor's bankruptcy.

At first, the applicability of the UFCA's fraudulent conveyance provisions to leveraged buyouts was a matter of some dispute. See Note, Fraudulent Conveyance Law and Leveraged Buyouts, 87 Colum.L.Rev. 1491, 1510-13 (1987) (reviewing arguments for and against subjecting leveraged buyouts to fraudulent conveyance laws). However, we think it settled, as a general matter at least, that the fraudulent conveyance provisions of the UFCA extend to leveraged buyouts,10 and defendants do not contest their applicability here.

Because of the difficulty in proving intentional fraud, challenges to leveraged buyouts tend to be predicated on the constructive fraud provisions of the UFCA. See Cieri et al., supra note 2, at 353. In the few instances in which leveraged buyouts have been set aside under the Act's intentional fraud provisions, an intent to defraud has been inferred from the circumstances surrounding the transaction. See, e.g., Gleneagles Inv. Co., 565 F.Supp. at 582-83, aff'd in relevant part sub nom. Tabor Court Realty Corp., 803 F.2d at 1304-05. Accordingly, the question whether a leveraged buyout constitutes a fraudulent conveyance will typically turn on application of the UFCA's constructive fraud provisions.

With these general principles in mind, we turn now to an analysis of the leveraged buyout of Jeannette under the constructive and then intentional fraud provisions of the UFCA.

* According to the district court, the leveraged buyout was without fair consideration to Jeannette because, in exchange for granting Security Pacific security interests in all its assets and undertaking an $11.7 million demand obligation at 3 1/4% above prime, all Jeannette received was new management and access to credit. Moody, 127 B.R. at 992. Defendants do not challenge this finding, and we accept it for purposes of our analysis here. Cf. Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635, 646 (3d Cir.1991), cert. denied sub nom. Committee of Unsecured Creditors v. Mellon Bank, N.A., --- U.S. ----, 112 S.Ct. 1476, 117 L.Ed.2d 620 (1992) ("The target corporation ... receives no direct benefit to offset the greater risk of now operating as a highly leveraged corporation.").

The district court's allocation of the burden of proving solvency is a different matter. Defendants assert that if the burden of proof shifts upon a showing of no fair consideration, it should be by a preponderance of the evidence. This position is contrary to the Pennsylvania cases relied on by the district court, which apply the clear and convincing evidence standard. See, e.g., Baker v. Geist, 457 Pa. 73, 321 A.2d 634, 637 (1974); First Nat'l Bank v. Hoffines, 429 Pa. 109, 239 A.2d 458, 462 (1968). Defendants, however, contend these cases are inapposite because they involved "intrafamilial transfers."

Because leveraged buyouts are consummated between distinct corporate entities at arm's length, defendants assert that the potential for collusion and concealment is less than in intrafamilial transfers and, therefore, judicial scrutiny should be less searching. However, the stakes are higher in the typical leveraged buyout, and, at least from the perspective of unsecured creditors, the potential for abuse is great. As we noted in Mellon Bank, N.A.:

The effect of an LBO is that a corporation's shareholders are replaced by secured creditors. Put simply, stockholders' equity is supplanted by debt. The level of risk facing the newly structured corporation rises significantly due to the increased debt to equity ratio. This added risk is borne primarily by the unsecured creditors, those who will most likely not be paid in the event of insolvency.

945 F.2d at 646. See also Queenan, The Collapsed Leveraged Buyout and the Trustee in Bankruptcy, 11 Cardozo L.Rev. 1, 3-5 (1989) (discussing the risks inherent in leveraged buyout transactions). Accordingly, we do not believe the Pennsylvania Supreme Court would scrutinize leveraged buyouts less closely than intrafamilial transfers.11

Although we are inclined to hold that the Pennsylvania Supreme Court would impose the same burden on defendants in leveraged buyouts as that imposed in intrafamilial transfers, we need not decide the issue here because we conclude that defendants have met even the clear and convincing evidence standard. Similarly, because we conclude that defendants have proven adequacy of capital by clear and convincing evidence, we need not decide the standard applicable to defendants' burden of proving adequacy of capital.12

We turn now to the thrust of plaintiff's attack, the district court's solvency and adequacy of capital analyses. As we have discussed, under § 4 of the UFCA a conveyance is fraudulent if it is made without fair consideration and renders the transferor insolvent. See Pa.Stat.Ann. § 354. "A person is insolvent when the present, fair, salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured." Id. § 352(1) (emphasis added). The Pennsylvania Supreme Court has interpreted this provision as requiring solvency in both the "bankruptcy" and "equity" sense, Larrimer v. Feeney, 192 A.2d at 35.13 Insolvency is determined "as of the time of the conveyance." Angier v. Worrell, 346 Pa. 450, 31 A.2d 87, 89 (1943).

The district court valued Jeannette's assets on a going concern basis and found that immediately after the leveraged buyout the present fair salable value of Jeannette's total assets was at least $26.2-$27.2 million (of which $5-6 million comprised PP & E). It then found that the company's total liabilities were $25.2 million. Moody, 127 B.R. at 982. Thus, the district court concluded that Jeannette was solvent in the bankruptcy sense "by at least $1-2 million and most probably by more, given the conservative value ... assigned Jeannette's PP & E." See id.14

At trial, plaintiff argued that Jeannette was rendered insolvent in the bankruptcy sense because the present fair salable value of Jeannette's total assets could not have exceeded the $12.1 million J. Corp. paid for Jeannette's stock. Id. at 994 n. 10. The district court rejected this argument and undertook its own valuation of Jeannette's assets. We find no error here. Although purchase price may be highly probative of a company's value immediately after a leveraged buyout, it is not the only evidence. Cf. Mellon Bank, N.A., 945 F.2d at 649 (rejecting as "cavalier" valuation of target's assets solely on the basis of amount paid to company's former shareholders). The parties here viewed the $12.1 million purchase price as a "significant bargain," made possible by Coca-Cola's decision to focus attention on its bottling business and Brogan's ability to close the deal quickly. Moody, 127 B.R. at 970.

On appeal, plaintiff focuses on the district court's valuation of Jeannette's PP & E. He argues that the district court erred in valuing Jeannette's PP & E on a going concern basis because these assets were not "presently salable" at the time of the leveraged buyout. In addition, he asserts that the $5-6 million the district court assigned Jeannette's PP & E is unsupported by the record. If the district court overstated Jeannette's PP & E by more than $1 million, the company is left with a deficit net worth and we must find that Jeannette was rendered insolvent in the bankruptcy sense.

To be "salable" an asset must have "an existing and not theoretical market." Gleneagles Inv. Co., 565 F.Supp. at 578. See also Rosenberg, Intercorporate Guaranties and the Law of Fraudulent Conveyances: Lender Beware, 125 U.Pa.L.Rev. 235, 255 (1976). Jeannette's PP & E, which comprised real estate and machinery used in the production of glass and pottery, was not highly liquid. Therefore, in determining the present fair salable value of Jeannette's PP & E, the time frame in which these assets must be valued is critical.

Plaintiff argues that valuation on a going concern basis fails to give effect to "present" in the UFCA's "present fair salable value" language, see 39 Pa.Stat.Ann. § 352(1), and the district court should have calculated the amount the company would have received had it attempted to liquidate its PP & E on the date of the acquisition or immediately thereafter. We disagree. Where bankruptcy is not "clearly imminent" on the date of the challenged conveyance, the weight of authority holds that assets should be valued on a going concern basis. See, e.g., In re Taxman Clothing Co., 905 F.2d 166, 169-70 (7th Cir.1990) (under Bankruptcy Code going concern valuation is proper unless "business is on its deathbed"); Kupetz v. Continental Ill. Nat'l Bank & Trust Co., 77 B.R. 754, 763 (C.D.Cal.1987) (valuing assets on going concern basis under UFCA), aff'd sub nom. Kupetz v. Wolf, 845 F.2d 842 (9th Cir.1988); Vadnais Lumber Supply, Inc. v. Byrne (In re Vadnais Lumber Supply, Inc.), 100 B.R. 127, 131 (Bankr.D.Mass.1989) ("The proper standard of valuation to be applied in determination of solvency in a bankruptcy proceeding is the value of the business as a going concern, not the liquidation value of its assets less its liabilities."); Fryman v. Century Factors, Factor for New Wave (In re Art Shirt Ltd.), 93 B.R. 333, 341 (E.D.Pa.1988) (under Bankruptcy Code assets should be valued on going concern basis unless company is "on its deathbed").15

Although most of these cases involve application of the Bankruptcy Code, we have previously looked to the federal bankruptcy laws in interpreting the UFCA. As we noted in Tabor Court Realty Corp., "[t]he fraudulent conveyance provisions of the [Bankruptcy] Code are modeled on the UFCA, and uniform interpretation of the two statutes [is] essential to promote commerce nationally." 803 F.2d at 1298-99 (citing Cohen v. Sutherland, 257 F.2d 737, 741 (2d Cir.1958)) (internal quotations omitted). Thus, although the UFCA's "present fair salable value" language differs from the Bankruptcy Code's "fair valuation" requirement, see 11 U.S.C. § 101(31)(A), we find the bankruptcy cases instructive on the proper valuation standard here. See Cieri et al., supra note 2, at 361 ("The UFCA's 'present fair salable value' and the Bankruptcy Code and UFTA's 'fair valuation' probably should be viewed as interchangeable standards for valuing an LBO's target's assets.").

Moreover, we think valuation on a going concern basis strikes the proper balance between "present" and "fair" in the UFCA's "present fair salable value" language. See 39 Pa.Stat.Ann. § 352(1). The approach set forth in United States v. Gleneagles Investment Co. is instructive. There the district court valued the debtor's assets, which included mining and coal processing equipment, according to the amount that would have been obtained if they were "liquidated with reasonable promptness in an arms-length transaction in an existing and not theoretical market." 565 F.Supp. at 578. See also Fraudulent Conveyance Law and Leveraged Buyouts, supra, at 1505 n. 113.16

As plaintiff points out, the Pennsylvania Supreme Court applied a more immediate valuation standard in Fidelity Trust Co. v. Union National Bank, 313 Pa. 467, 169 A. 209 (1933). Although recognizing that "market value of an asset is generally controlling," it held that the trial court erred in declining to consider the "actual value" of stock subject to the debtor's speculation scheme on the date of the challenged conveyance. Id. at 213 (emphasis in original).17 The district court here concluded that Fidelity Trust Co. "stands for the proposition that we may not ignore the economic realities of the transfer before us," and, therefore, does not compel valuation on a liquidation basis in every instance. Moody,