Brooke Chapter 7 trustee agrees to $1.25 million BNY Mellon settlement

By Caroline Salls

Pittsburgh, Oct. 19 – Brooke Corp. Chapter 7 trustee Christopher J. Redmond requested court approval of a $1.25 million claim settlement reached with securitization indenture trustee Bank of New York Mellon, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Kansas.

Redmond said various Brooke franchisees entered into loans with Aleritas for the payment of franchise fees before Brooke filed for bankruptcy. Many of those loans were packaged by Aleritas and sold into securitizations for which BNY Mellon serves as indenture trustee.

In September 2008, BNY Mellon filed a lawsuit in the U.S. District Court for the District of Kansas against Brooke Corp., Brooke Capital Corp. and other affiliated entities seeking to recover various alleged damages. The Brooke entities subsequently filed for bankruptcy.

In November 2009, BNY Mellon filed numerous proofs of claim on behalf of the various securitizations for which it serves as trustee.

“BNY Mellon’s original claims filed against the Brooke Corp. and Brooke Capital bankruptcy estates were unsecured and were very significant (totaling over $133 million in the aggregate),” Redmond said in the motion.

On March 7, 2016, BNY Mellon amended its proofs of claim, reducing the total claim amount to $77.5 million.

Redmond said these claims seek payment of alleged damages suffered by the holders of the notes of six separate securitizations based on Brooke’s alleged breaches of contract, tortious interference with contract, fraud and conversion.

Upon payment of the $1.25 settlement amount, BNY Mellon will not participate as a creditor in any of the Brooke debtors’ bankruptcy estates or receive any creditor distribution, except in connection with one $300,000 claim.

Based in Overland Park, Kan., Brooke is a holding company for insurance and banking services distribution companies. The company filed for bankruptcy on Oct. 28, 2008, and its Chapter 11 case number is 08-22786.

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