Third Circuit Raises the Bar on Grants of Substantive Consolidation

It still may be too early to gauge the ultimate legacy that the 3d U.S. Circuit Court of Appeal’s reversal of a trial court’s grant of substantive consolidation in the Owens Corning bankruptcy case will have on reorganizations, securitizations, and business transactions in general. However, in propounding a new standard, the 3d Circuit raised the evidentiary bar necessary to establish a prima facie showing that substantive consolidation is warranted.