Official Committee of Unsecured Creditors v. Hancock Park Capital II, L.P.

OPINION

IKUTA, Circuit Judge:

This case presents the question whether a debtor’s pre-bankruptcy transfer of funds to its sole shareholder, in repayment of a purported loan, may be a constructively fraudulent transfer under 11 U.S.C. § 548(a)(1)(B). In order to answer this question, we must determine whether a bankruptcy court has the power to rechar-acterize the purported loan as an equity investment. We hold that a court has the authority to determine whether a transaction creates a debt or an equity interest for purposes of § 548, and that a transaction creates a debt if it creates a “right…