Life Partners fractional position holders get plan treatment options

By Caroline Salls

Pittsburgh, Nov. 30 – Life Partners Holdings, Inc. filed its plan of reorganization and related disclosure statement on Nov. 26 with the U.S. Bankruptcy Court for the Northern District of Texas.

The company said the plan contains a feature that allows current holders of fractional interests and IRA notes related to policies to elect what plan treatment they would like.

Under option one, fractional holders will be treated as a holder of a continued position. This option means the holder is electing to confirm its status as owner of 95% of its fractional position and to make a continuing position holder contribution of 5%. All holders who make this election will be required to make any policy premium catch-up payments and will continue to be responsible for premiums.

Continuing IRA holders will be relieved of all future obligations to pay any premiums or other charges, as these amounts will be taken into account in determining the principal amount of the new IRA note to be received by the holder.

Under option two, the fractional position will be contributed to a position holder trust in exchange for either a beneficial interest in the trust or, if the position is an IRA note, interest in an IRA partnership.

Under option three, the purchase of the fractional position will be rescinded, and holders will be treated as general unsecured creditors.

IRA holders will have a fourth option, under which an IRA note will be distributed to the owner of the IRA holder so it is owned outside of the IRA. As a result, the individual owner will be able to make a continuing holder election to become a continuing fractional holder under the plan.

Current position holders who make no election will be treated as having chosen option one.

Life Partners said three new legal entities will be formed to implement the provisions of the plan, including a position holder trust, Life Partners IRA Partnership LLC and a creditors’ trust, which will pursue litigation.

Holders of general unsecured claims will receive creditors’ trust distributions.

The Securities and Exchange Commission will receive a creditors’ trust interest up to the amount of a $38.7 million judgment. This interest will be subordinated in right to receive any distributions to a level below all other creditor trust interests.

Interests will be cancelled with no distribution to holders.

Waco, Texas-based Life Partners is engaged in the secondary market for life insurance. The company filed for bankruptcy on May 20, 2015. Its Chapter 11 case number is 15-40289.

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