First Magnus liquidation plan confirmed

By Caroline Salls

Pittsburgh, Feb. 29 - First Magnus Financial Corp.'s plan of liquidation was confirmed Thursday by the U.S. Bankruptcy Court for the District of Arizona.

Under the plan, First Magnus will wind down its operations and a liquidation trustee and litigation trustee will be appointed.

The company said it expects to distribute $28 million to $44 million to unsecured creditors, and additional recoveries may be available for unsecured creditors through the capture of equity following the sale of the remaining portion of the company's warehouse loan portfolio, the sale of intellectual property and any litigation proceeds.

In addition, the plan incorporated a settlement with UBS Real Estate Securities, Inc. related to a loan repurchase agreement and related plan disputes.

Under the settlement, UBS has agreed to assign its rights to $1.06 million First Magnus collected for payment of taxes and insurance.

In addition, UBS will keep the $6.19 million in cash and cash equivalents that UBS is holding in an account established under the repurchase agreement.

Treatment of creditors under the plan will include:

• Holders of administrative claims will be paid in full on the plan effective date;

• Holders of priority tax claims will be paid in full in installments over five years;

• The rights to assets secured by holders of secured claims will either be transferred or abandoned by the company or the assets will be sold and the lien will be attached to the sale proceeds;

• Holders of general unsecured claims will receive cash from a dividend fund;

• Holders of Washington Mutual EPA repurchase agreement will return $3.15 million in loans to First Magnus and will not assert any claims against First Magnus in connection with the repurchase agreements;

• Credit borrowers will receive the lesser of $50,000 after all administrative and priority claims have been paid and the amount of their claim;

• Holders of repo participants claims will have the right to liquidate mortgages under repurchase agreements; and

• Holders of subordinated claims and equity security interests will receive no distribution under the plan.

First Magnus, a Tucson, Ariz., mortgage loan originator, filed for bankruptcy on Aug. 21, 2007. Its Chapter 11 case number is 07-10578.

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