Life Partners party looks to streamline process for competing plans

By Caroline Salls

Pittsburgh, April 5 – Life Partners Holdings, Inc. interested party Vida Capital, Inc. asked the U.S. Bankruptcy Court for the Northern District of Texas to establish formal procedures for a competing Chapter 11 plan process and continue the April 18 hearing on approval of Life Partners’ disclosure statement, according to motions filed Monday with the court.

Vida filed a Chapter 11 plan for the Life Partners case on Tuesday and said party in interest Transparency Alliance LLC will also file a competing plan shortly.

“Given that there appear to be over 20,000 parties in interest in this case, Vida believes that it is in the best interests of the debtors’ estates, creditors and other parties in interest to formalize procedures for a competing plan process which will have at least three and potentially more plans,” Vida said in its procedures motion.

“It makes little sense for the court to approve the [Life Partners] joint disclosure statement, have the joint disclosure statement and joint plan mailed out, and then shortly afterwards, approve additional disclosure statements that are solicited, and then have to conduct two or more confirmation hearings.

“That kind of ad hoc and disorganized process will sow mass confusion among the 20,000 constituents in this case, and will be certain not to result in the court confirming the one plan that furthers the preferences of creditors and equity security holders.”

As a result, Vida suggests that the court order the trustee for Life Partners’ case to file a general disclosure statement by May 2 that is not specific to any particular Chapter 11 plan, the terms of which are agreed upon by the competing plan proponents.

Each proponent would then file and seek approval of its own disclosure document that is specific to its own plan, and the court would conduct coordinated omnibus hearings on June 2 to consider all of the disclosure statements at the same time.

Under Vida’s proposed timeline, the plan confirmation hearings would begin on Aug. 29.

Vida plan terms

According to its plan, Vida will acquire 100% of the new stock in reorganized Life Partners and carry on its business.

Treatment of creditors under the competing plan filed by Vida would include:

• The Securities and Exchange Commission will receive a share of net cash, plus all cash received by the litigation trust from the liquidation of causes of action and excluded assets, provided, however, that all distributions from the trust otherwise payable to the SEC will instead go to a continuing holder and policy fund;

• Holders of general unsecured claims will receive a share of net cash, plus all cash received by the litigation trust from the liquidation of causes of action, contributed causes of action and excluded assets; and

• Holders of equity interests will receive no distribution.

Plan comparison

As previously reported, under Life Partners’ proposed plan, three new legal entities will be formed to implement the provisions of the plan, including a position holder trust, Life Partners IRA Partnership LLC and a creditors’ trust, which will pursue litigation.

Holders of general unsecured claims will receive creditors’ trust distributions.

The SEC will receive a creditors’ trust interest up to the amount of a $38.7 million judgment. This interest will be subordinated in right to receive any distributions to a level below all other creditor trust interests.

Interests will be cancelled with no distribution to holders.

Under the company’s plan, holders of fractional interests and IRA notes can make an election related to their policy holdings. Meanwhile, the Vida plan allows non-qualified plan holders to make an election under its proposed plan, but specifies that IRA noteholders will be deemed to have made an assigning holder election and qualified plan holders can only choose between a continuing policyholder election and assigning holder election.

Waco, Texas-based Life Partners is engaged in the secondary market for life insurance. The company filed for bankruptcy on May 20, 2015. Its Chapter 11 case number is 15-40289.

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