Emergent Capital Inc. (fka EMGCQ)

[Enterprising Investor]

Deal To End $367M White Eagle Lender Fight Gets Court Nod (6/05/19)

By Vince Sullivan

Law360, Wilmington (June 5, 2019, 8:14 PM EDT) -- A Delaware bankruptcy judge approved a settlement Wednesday between life insurance investment firm White Eagle Asset Portfolio LP and its secured lender that will end a fight over $367 million in prepetition debt and allow the Chapter 11 case to move toward confirmation.

During a hearing in Wilmington, U.S. Bankruptcy Judge Kevin Gross overruled the objections of the U.S. Trustee's Office to approve the settlement, saying the watchdog’s arguments about the breadth of releases included in the settlement didn’t jibe with the facts of the case.

He said the dispute between White Eagle and lender LNV Corp. was central to the Chapter 11 case and the proposed plan of the debtors, and the resolution of the bitter fight was necessary to confirm the plan.

“Are the releases broad? Yes,” Judge Gross said. “The releases have to be broad here because of the bitterness of the parties and I think for that reason the releases are appropriate in this case.”

The fight broke out almost immediately after White Eagle filed for Chapter 11 protection in November, with LNV and its parent Beal Bank accusing the debtor of using the bankruptcy process to pay the expenses of its own non-debtor parent, Emergent Capital. White Eagle then alleged in an adversary suit that LNV used its clout as lender to drive White Eagle into bankruptcy so it could more easily take control of its assets.

The settlement allows LNV’s claims in the amount of $382.7 million and provides a timeline during which White Eagle can pay down that amount from the proceeds of some of the more than 500 life insurance policies in its portfolio. If LNV isn’t paid in full by Sept. 14, then White Eagle’s remaining assets will be liquidated pursuant to a sale process that must close before the end of 2019, according to court documents. The adversary suit filed by White Eagle will be dismissed as part of the deal.

The deal also includes mutual releases given by White Eagle, LNV and all of its professionals, employees and affiliates, as well as professionals and employees of those affiliates, among other categories of people and entities for any and all existing and future claims.

The U.S. Trustee’s Office opposed the scope of those releases, saying it was improper for people far removed from the dispute, such as former employers of non-debtor affiliates of White Eagle, to be forced to give releases of their potential claims without being given notice of the settlement terms.

“The motion gives zero notice that the debtor intends to have parties that are not signatories to the settlement give releases,” trustee representative Juliet Sarkessian told the court.

Judge Gross said the opposition was well-founded, but seemed to address theoretical concerns when there was a concrete resolution in hand.

“They’re mutual releases. Both sides are getting releases,” Judge Gross said. “There’s consideration going both ways and whether actions would be brought by employees against the lender parties or not, I think that is so unlikely as to almost be an academic issue. It just doesn’t have practical effect.”

The court also approved a $15 million debtor-in-possession loan from LNV as part of the settlement and an agreement that lender attorneys White & Case LLP will cap their expenses at $5 million through the end of June.

White Eagle entered Chapter 11 in November, reporting “substantial losses” and a nearly $150 million accumulated deficit. A hearing on confirmation of its Chapter 11 plan is scheduled for June 19 before Judge Gross, who approved the plan disclosure statement Wednesday.

White Eagle is represented by Richard M. Pachulski, Ira D. Kharasch, Maxim B. Litvak and Colin R. Robinson of Pachulski Stang Ziehl & Jones LLP.

LNV is represented by Thomas E. Lauria, Jesse L. Green, David M. Turetsky, Andrew T. Zatz, Jason N. Zakia, Kimberly A. Haviv and Samuel P. Hershey of White & Case LLP, and Jeffrey M. Schlerf and Carl D. Neff of Fox Rothschild LLP.

The U.S. Trustee's Office is represented by Juliet Sarkessian.

The case is In re: White Eagle Asset Portfolio LP, case number 18-12808, in the U.S. Bankruptcy Court for the District of Delaware.

--Additional reporting by Jeff Montgomery and Rose Krebs. Editing by Amy Rowe.

https://www.law360.com/articles/1166159/deal-to-end-367m-white-eagle-lender-fight-gets-court-nod