Emergent Capital unit in bankruptcy, to file suit against lender

By Caroline Salls

Pittsburgh, Dec. 14 – Emergent Capital, Inc. wholly owned indirect Delaware subsidiary White Eagle Asset Portfolio, LP filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the District of Delaware, according to an 8-K filed by Emergent with the Securities and Exchange Commission.

White Eagle chief financial officer Miriam Martinez said in a statement filed with the court that credit facility lender LNV Corp. “improperly exercised its discretion” granted in the pre-bankruptcy loan agreement by undervaluing the company’s insurance portfolio and “has charged excessive fees in order to disallow any distributions to WEAP.”

Martinez said White Eagle plans to file a lawsuit against LNV for breaches of contract, breaches of fiduciary duty and other claims and also intends to challenge LNV’s rights to a participation interest.

“The filing of the debtors’ cases was necessary in order to prevent LNV from exercising remedies that would have allowed LNV to take possession of the pledged interests in WEAP and/or otherwise sweep the debtors’ funds and insurance proceeds,” Martinez said.

“The purpose of these Chapter 11 cases is to ensure that the equity value in the debtors’ estates is preserved for the benefit of all stakeholders, and not just LNV.”

Martinez said White Eagle will propose a plan of reorganization that will pay LNV’s allowed claims in full, while maximizing the value of the debtors’ assets for all parties.

Emergent said the holders of its 8½% senior secured notes due 2021 and 5% senior unsecured convertible notes due 2023 waived any defaults that would arise in connection with the bankruptcy filing before it was made.

However, the company said related Chapter 11 filings made by wholly owned indirect Irish subsidiary Lamington Road DAC and wholly owned indirect Delaware subsidiary White Eagle General Partner, LLC on Nov. 14 do constitute an event of default under White Eagle’s revolving credit facility.

Any efforts by lender LNV Corp. or administrative agent CLMG Corp. to enforce repayment by White Eagle are automatically stayed as a result of the bankruptcy filings.

Emergent said a standstill agreement among White Eagle, LNV and CLMG expired before White Eagle’s filing.

In connection with the filing, White Eagle has requested court approval to use the cash collateral of its pre-bankruptcy secured parties to fund its operations while in bankruptcy.

The company’s access to the cash collateral will expire on the earliest of 45 days after entry of an interim order if a final order has not been entered, the effective date of a Chapter 11 plan, the closing of a sale of the company’s assets, dismissal or conversion of the Chapter 11 cases and occurrence of a termination event.

According to court documents, White Eagle asset portfolio has $500 million to $1 billion in assets and $100 million to $500 million in debt.

The company did not list any unsecured creditors with claims of $1 million or more.

White Eagle is represented by Pachulski Stang Ziehl & Jones LLP.

Emergent is a Boca Raton, Fla., specialty finance company that invests in life settlements. White Eagle’s Chapter 11 case is being administered under case number 18-12808.

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