PMI Wins Confirmation Of Ch. 11 Reorganization Plan
Law360, Wilmington (July 24, 2013, 8:36 PM ET) -- PMI Group Inc. secured confirmation of its Chapter 11 plan Wednesday as a Delaware bankruptcy judge agreed to sign off on a reorganization that will see the mortgage insurance holding company pay creditors $200 million in cash and emerge as a going concern.
U.S. Bankruptcy Judge Brendan L. Shannon removed major roadblocks to PMI's exit path when he overruled key objections at a confirmation hearing Friday, but final approval had been left to hang fire after time constraints prevented the court from tackling other outstanding issues.
Those loose ends were tied up quickly at a teleconference Wednesday, during which PMI attorney Joseph M. Barry told the court that the lion's share of those issues had since been resolved and Judge Shannon ruled on what little of what remained.
Judge Shannon said he would sign the conformation order as soon as a clean version was submitted under certification of counsel.
Entry of the conformation order will mark the final step on PMI's lengthy trip through Chapter 11, which began in November 2011.
PMI Group entered court protection after its business collapsed in the housing bust and the Arizona Department of Insurance seized its operating subsidiary — PMI Mortgage Insurance Co., or MIC — but made little headway toward an exit during the first year as the bankruptcy case bogged down in a multistate dispute over $2.2 billion in tax assets.
A mediated settlement in November 2012 paved the way for the current plan, in which a reorganized PMI will emerge as a going concern holding up to $1.2 billion in tax assets, while senior noteholders and unsecured creditors owed approximately $700 million will divvy up $200 million in cash and receive new stock in the company for the balance of their claims.
On Friday, Judge Shannon shot down objections to the plan from the U.S. Attorney's Office, which contended the plan's primary purpose was to avoid paying taxes, and the U.S. trustee, which claimed the reorganized entity would merely be an empty shell in search of speculative turnaround.
Discussions with those parties in the following days resulted in minor changes that addressed their remaining concerns, Barry said, and both the federal government and the U.S. trustee had since agreed to sign off on the proposed order.
The only unresolved issue presented Wednesday was an objection from the committee of unsecured creditors opposing language that would affirm that the bankruptcy court was not taking jurisdiction over MIC, which had been placed in receivership by an Arizona court.
Committee counsel Anthony Princi argued that while the language had been previously included in the plan and disclosure statement, it should be left out of the order because MIC and the receiver had submitted themselves before the Delaware court during the confirmation hearing.
“I believe the language should track," Judge Shannon said in overruling the objection. “I don't believe that participation in the conformation hearing changes landscape.”
PMI Group and MIC had been at loggerheads over the use of the $2.2 billion in tax assets before reaching their mediated settlement in 2012. In the deal, PMI Group received $20 million from MIC in exchange for $1 billion of net operating losses, according to court documents, retaining the other $1.2 billion of tax breaks for its own use.
Under the approved reorganization plan, senior noteholders, owed $691.1 million, and general unsecured creditors, owed between $6.3 million and $10.3 million, will receive essentially the same treatment, with both groups receiving a split of cash and new PMI stock.
Recovery for senior noteholders is estimated at 29 percent, a few points higher than that of general claimholders, because the former will receive distributions that would otherwise go to subordinated noteholders per the underlying indenture agreements, according to the disclosure statement.
PMI is represented by Pauline K. Morgan, Joseph M. Barry, Kara Hammond Coyle and Patrick A. Jackson of Young Conaway Stargatt & Taylor LLP.
The creditors committee is represented by Francis A. Monaco Jr., Kevin J. Mangan and Thomas M. Horan of Womble Carlyle Sandridge & Rice LLP and Anthony Princi and Jordan A. Wishnew of Morrison & Foerster LLP.
The case is In re: The PMI Group Inc., case No. 1:11-bk-13730, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Matt Chiappardi and Lance Duroni. Editing by Chris Yates.
News 
Market Data 
Discover 
AI
