Avoca, Lehman Commercial Paper ink participation rights settlements

By Caroline Salls

Pittsburgh, Aug. 21 – Avoca CLO IV plc, Avoca CLO V plc and Lehman Commercial Paper Inc. (LCPI) reached claim settlements tied to facility participation rights, according to a notice released Friday.

Avoca’s secured deferrable floating-rate noteholders, subordinated noteholders and combination noteholders will be asked to vote on the proposed settlement at meetings scheduled for Sept. 15.

Avoca CLO V acquired a participation right in a facility in which Gala Group Finance Ltd. was the borrower and LCPI was the lender. In September 2008, Avoca’s rights under the Gala participation were elevated to lender of record under the facility from participant.

LCPI’s official committee of unsecured creditors claimed that Avoca CLO V and LCPI entered into a tolling and forbearance agreement that extended LCPI’s deadline for filing an action against Avoca to avoid the Gala elevation as a preferential transfer.

Under the proposed settlement, Avoca CLO V would pay $163,000 to LCPI to resolve the claims.

LCPI has agreed to reduce its demand in connection with the settlement. Specifically, the notice said the settlement reflects a reduction in the total action value attributable to the Avoca CLO V by 89.8%, leaving a net action value of 10.2% of the $1.59 million sum originally claimed.

The Avoca CLO V noteholders are also being asked to approve an amendment to the notes to allow the settlement amount to be paid in accordance with the priorities of payment.

The noteholders will also vote on the establishment of a €100,000 reserve to be held in an interest account to fund any indemnity claims received by Avoca from the notes’ trustee under the settlement for a period of one year from the payment of the settlement amount.

Meanwhile, Avoca CLO IV acquired a participation interest a facility under which AVR Acquisitions BV was the borrower and Lehman Commercial Paper Inc., U.K. branch, was lender. Avoca CLO IV’s rights were elevated to lender of record under the AVR facility.

LCPI’s official committee of unsecured creditors claimed that Avoca CLO IV and LCPI entered into a tolling and forbearance agreement that extended LCPI’s deadline for filing an action against Avoca to avoid the AVR elevation as a preferential transfer.

Under the proposed settlement, Avoca CLO IV will pay $694,000 to LCPI. The original claim was for $6.64 million.

The Avoca CLO IV noteholders are also being asked to approve an amendment to the notes to allow the settlement amount to be paid in accordance with the priorities of payment.

The noteholders will also vote on the establishment of a €100,000 reserve to be held in an interest account to fund any indemnity claims received by Avoca from the notes’ trustee under the settlement for a period of one year from the payment of the settlement amount.

Avoca is a Dublin-based credit investment management firm.

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