Stearns Holdings amended Chapter 11 plan deemed effective as of Nov. 5

By Caroline Salls

Pittsburgh, Nov. 6 – Stearns Holdings, LLC’s amended Chapter 11 plan took effect on Tuesday, according to a notice filed with the U.S. Bankruptcy Court for the Southern District of New York.

The plan was confirmed on Oct. 24.

As previously reported, Stearns filed bankruptcy to implement an agreement with its majority equityholder, funds affiliated with Blackstone Capital Partners, on the terms of a comprehensive financial restructuring plan.

Through the restructuring, Stearns said Blackstone has agreed to serve as plan sponsor and contribute substantial new capital to Stearns in return for acquiring substantially all of the ownership of the company.

Last month, Stearns reached an agreement with its largest noteholders under which the noteholders will support the modified plan.

The noteholders who entered the agreement and/or funds that they advise and manage collectively hold almost two-thirds of the face amount of Stearns’ notes.

With the noteholders’ support, Blackstone will serve as the plan sponsor and will contribute $65 million in new capital plus additional cash to pay some claims on the plan effective date in return for 100% of the ownership of the reorganized company.

This contribution is in addition to up to $30 million in debtor-in-possession financing that Blackstone has agreed to refinance under the plan.

DIP financing claims will be paid in full in cash or converted into exit financing.

Holders of notes secured claims will receive a share of $65 million in cash, warrants and new notes.

General unsecured claims will be paid in full in cash or reinstated.

Holders of Artemis note claims will receive no distribution.

Existing Stearns Holdings equity interests will be canceled.

Stearns is a Santa Ana, Calif.-based independent mortgage origination and servicing company. The company filed bankruptcy on July 9 under Chapter 11 case number 19-12226.

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