Life Partners revised third amended plan of reorganization confirmed

By Caroline Salls

Pittsburgh, Nov. 1 – Life Partners Holdings, Inc.’s revised third amended joint plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Northern District of Texas, according to a news release from Thompson & Knight LLP, which represents Life Partners Chapter 11 trustee H. Thomas Moran II.

As previously reported, the plan was submitted by Moran and the official committee of unsecured creditors in the Life Partners bankruptcy case.

Thompson & Knight said the confirmation clears the way for implementation of the plan and the creation of two new entities, Life Partners Position Holder Trust and Life Partners Creditors’ Trust.

The plan offers relief for more than 22,000 investors and preserves a $2.4 billion portfolio of life insurance policies. More than $1.4 billion of investor money remains at risk, the release said.

“Today's order is a tremendous victory for the investors we have been working so hard to protect,” Moran said in the release.

“We are delighted to have joined with the committee in obtaining confirmation of a plan which projects a substantial recovery for our investors – 90% of invested capital on average over time.

“Under the plan, investors have selected among various options for the recovery of their investments, including options that enable investors to avoid the financial burden of paying any further insurance premiums. Those investors who choose to tie their returns to individual policies are permitted to do so.”

Implementation

The plan will be implemented in collaboration with the committee and Vida Capital, Inc., which agreed to act as the policy servicer and investor account administrator. Vida has also agreed to provide exit financing so that the Position Holder Trust can emerge from bankruptcy and maturity funds can be distributed to fractional holders as soon as possible.

The Position Holder Trust will oversee the liquidation of the policy portfolio and distribution of the net proceeds to investors. The Creditors’ Trust will pursue litigation, including claims previously brought against insiders at Life Partners, individuals and entities who received monies from the fraudulent enterprise and others against whom the investors or the company may have a right to recover.

The plan includes the sale of post-confirmation servicing rights to Vida in return for $5 million.

Under the plan, recoveries from the litigation will be distributed to investors and other creditors.

Creditor treatment

Specific treatment of creditors will include:

• Holders of secured claims will either have their claims reinstated, be paid in full in cash or receive the collateral securing the claim;

• Holders of general unsecured claims will receive a Creditors’ Trust interest;

• In exchange for the company’s dismissal of its appeal of a Securities and Exchange Commission judgment, the trust interest that would have gone to the SEC will be reallocated to investors or to the Position Holder Trust;

• Intercompany claims will be subordinated, released and cancelled without distribution;

• Interests will be cancelled and released without distribution to holders; and

• Fractional interest holders and IRA holders can choose treatment under a continuing holder election, a Position Holder Trust election and a Creditors’ Trust election. The IRA holders can also choose from a conversion option.

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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