March 13, 2019 – The Debtors filed a Plan and a related Disclosure Statement [Docket Nos. 165 and 166]. This is an unusual Plan in that the Debtors insist that there are no impaired classes (although the Debtors' existing secured lenders ("LNV," with whom they are currently entangled in an adversary proceeding) might disagree with that assessment) and, as a result, there will be no Plan voting. From the outset, the Debtors have made it clear that their Chapter 11 was necessitated by liquidity issues largely created by LNV and the Plan is designed to extricate the Debtors from what they assert are deliberate efforts to starve them of "cash flows to which they are rightfully entitled and which are necessary to administer WEAP’s insurance portfolio;" this extrication to occur by replacing debt held by the allegedly oppressive senior lenders with new senior financing.
Critical to the Debtors' Plan is the ability of the Debtors to find exit financing to replace the $367.9mn (plus interest) currently owed to their senior lenders. The Debtors' Disclosure Statement states that the "material terms of the New Exit Facility are in the process of being negotiated and will be filed with the Bankruptcy Court as part of the Plan Supplement at a later date." The Disclosure Statement also makes clear, however, that the new financing (from as yet undisclosed sources) is not a certainty, with a risk factor that notes, "The Plan is predicated on, among other things, consummation of the New Exit Facility. There can be no assurance that the Debtors will receive any or all of the funding contemplated under the New Exit Facility, or that the New Exit Facility will be consummated."
In a motion to extend exclusivity, also filed on March 13, 2019 and which we cover separately [Docket No. 167], the Debtors further underscore the uncertainty of the required exit financing, noting "The Debtors are in the process of lining up exit financing as part of the Plan, An adversary proceeding has been commenced against LNV and certain other defendants. Just this week, this Court held an initial status conference in the adversary proceeding and that litigation is moving forward with motions to dismiss to be considered by the Court in early May 2019....It will take time for a refinancing option to be identified [emphasis added] and for the amount of LNV’s allowed claims to be determined.”
Key Elements of Plan
The Debtors' Disclosure Statement provides the following Plan overview:
“The Debtors believe that the Plan provides the best restructuring alternative available to these estates….No Holder of an Allowed Claim or Equity Interest is entitled to vote either to accept or to reject the Plan. All Classes of Claims and Equity Interests are Unimpaired under the Plan, are each deemed to accept the Plan by operation of law, and are not entitled to vote on the Plan.
The Debtors believe that the Plan provides the best restructuring alternative available to these estates. Notably, the Plan is comprised of the following key elements:
Through the Plan, the Debtors expect to reduce their ongoing cash interest expense through the new exit facility and to create a sustainable capital structure that will position the Reorganized Debtors to maximize the value of their life settlements portfolio for the benefit of all constituents."
Summary of Classes, Claims, Voting Rights and Expected Recoveries:
The Disclosure Statement attached the following Exhibits: