Vesta’s Chapter 11 plan draws objection from lender CoVenture

By Sarah Lizee

Olympia, Wash., Feb. 23 – Vesta Holdings, LLC’s Chapter 11 plan drew an objection from lender CoVenture, according to documents filed with the U.S. Bankruptcy Court for the District of Delaware.

As background, the debtors are part of a corporate family under Burtonvic Capital, which until recently was controlled by Joshua Coleman.

CoVenture said it is owed more than $58 million on account of loans made to Burtonvic and its subsidiaries, the proceeds of which were meant to be used to acquire insurance brokerage firms.

CoVenture said Coleman and Burtonvic fraudulently induced it to make loans by falsely representing the use of the loans, then diverting and concealing the diversion of the proceeds for other purposes.

The Securities and Exchange Commission recently filed a complaint detailing the transactions, including the fact that proceeds of CoVenture’s loans were diverted to pay other creditors, including the prepetition and DIP lenders.

CoVenture has filed proofs of claim against the debtors, which assert unliquidated litigation claims.

“The cloud of this fraud makes transparency and fair treatment of creditors even more important,” CoVenture said in its objection.

“Unfortunately, the disclosure statement and the plan each fall short in this regard.”

CoVenture said the debtors have filed a plan that, in two key respects, favors the prepetition and DIP lenders.

First, unsecured creditors are set to receive no recovery until the prepetition and DIP lenders are paid in full.

Second, the prepetition and DIP lenders, as well as virtually all of the debtors’ current and former officers, directors, employees and professionals, obtain broad releases even though they have not provided consideration, in the context of the plan, for those releases.

CoVenture said the disclosure statement provides almost no information about the value of the liquidating trust or the value of the claims that the debtors propose to release.

The disclosure statement also does not include information related to the claims and liens of the prepetition and DIP lenders, who are set to be paid ahead of unsecured creditors, CoVenture added.

The projected recovery for every class of claims under the plan, other than secured tax claims and other priority claims, is zero to 100%.

CoVenture said the debtors’ lack of real effort to help creditors understand what may happen if the plan is confirmed calls into question the motives behind the plan.

The Montgomeryville, Pa.-based wealth advisory, risk management services and insurance brokerage services company filed bankruptcy on Oct. 30 under Chapter 11 case number 22-11019.

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