ResCap junior noteholders oppose exclusivity extension, cite impasse

By Caroline Salls

Pittsburgh, Feb. 21 - An informal group of Residential Capital, LLC's junior secured noteholders objected to the company's proposed exclusivity extension, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The noteholders said ResCap's latest exclusivity extension request "rests principally on a false assumption that permitting the expiration of exclusivity at this critical juncture would be 'detrimental' to current plan negotiations with 'catastrophic' consequences for any consensual global resolution to these Chapter 11 cases."

The noteholder group said it is the expiration of exclusivity that will create the kind of balanced negotiation dynamic necessary to unite the cases' disparate creditor groups around a central plan construct, while a further extension would "only enshrine the status quo by encouraging parties to retrench, rather than reevaluate, their respective bargaining positions."

The noteholders said well-intentioned efforts to achieve consensus through mediation have seemingly emboldened some parties to harden their negotiating positions, secure in the knowledge that ResCap's present plan structure with its non-consensual third-party release provisions with Ally Financial "remains the only show in town."

"Even the best efforts of a sitting bankruptcy judge and experienced and respected mediator have been unable to break this impasse," the noteholders said in the objection.

"To create a negotiating dynamic amenable to peace, certain parties in interest in these Chapter 11 cases must first be incentivized to reconsider their present negotiation positions by facing the prospect of competing alternative plan structures, with potentially adverse treatment for certain constituencies."

A hearing is scheduled for Feb. 28.

Residential Capital, a New York-based mortgage originator and servicer, filed for bankruptcy on May 14, 2012. Its case number is 12-12020.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.