Court Confirms Penson's Chapter 11 Liquidation Plan Peg Brickley July 31, 2013
(c) 2013 Dow Jones & Company, Inc. Penson Worldwide Inc.'s liquidating Chapter 11 plan has been confirmed, ending one of the last chapters in the corporate life of the former securities handler. ...
Broker Penson Gets Nod For Ch. 11 Liquidation Plan
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Law360, Wilmington (July 31, 2013, 6:40 PM ET) -- A Delaware bankruptcy judge on Wednesday confirmed defunct broker-dealer Penson Worldwide Inc.'s Chapter 11 liquidation plan, allowing the company and its affiliates to distribute the proceeds realized during its two-year wind-down.
Having divested most of its assets since 2011, the Texas-based securities clearing broker entered bankruptcy in January to complete its liquidation under a plan developed in conjunction with its primary creditors.
The original Chapter 11 plan was developed during months of prepetition negotiations with a pair of unofficial committees representing noteholders owed a combined $300 million, Penson counsel Pauline K. Morgan said, and over the course of the case, all parties worked together to reach a consensual outcome.
“I'm pleased to be here today to seek confirmation of a plan on an uncontested basis,” Morgan told the court, noting that all objections had been resolved before the hearing.
The amended plan merited approval, she said, as it was backed by the two noteholder groups and the official committee of unsecured creditors and had received overwhelming support from voting creditors.
U.S. Bankruptcy Judge Peter J. Walsh gave the plan his blessing, signing off on the confirmation order without comment.
Founded in 1995, Penson once was the second-largest independent securities clearing broker in the U.S, but crippling operating losses and sputtering negotiations to restructure its long-term debt put the company under intense pressure from regulators to divest its broker-dealer business, according to court documents.
Penson shed its main assets before seeking court protection in January and subsequently sold off Nexa Technologies Inc., its sole remaining operating entity, for $10.5 million in a bankruptcy sale.
Under the approved Chapter 11 plan, the claims against the various Penson units will not be consolidated and creditors will be paid off from the assets of each individual entity.
Estimated recoveries vary by unit, but Penson Worldwide's unsecured creditors — a group that includes the noteholders — could see as much as a 15 percent return under the plan, according to court documents.
A new entity, Penson Technologies LLC, will be created to implement the plan, Morgan said, and will be overseen by Bryce B. Engel, Penson's president and chief operating officer.
Penson's troubles began in 2009, when the faltering global economy and associated decrease in trading volume bit into the company's commission and interest revenues, according to court documents.
The Plano, Texas-based company still managed to post revenues of $217.3 million in 2011, according to court documents, though it faced increasing pressure from regulators.
Penson sold its futures clearing business to Knight Execution and Clearing Services LLC in May 2012. About the same time, it spun off its securities clearing operations into Apex Clearing Corp. under an agreement with the Financial Industry Regulatory Authority, which had threatened regulatory action, according to court documents.
Judge Walsh in March approved the sale of Nexa, which develops front-end trading platforms and operates a database of trading data, to a Canadian financial services cooperative.
Under the terms of the deal, Penson received $7.5 million from purchaser Federation des Caisses Desjardins du Quebec plus $3 million from TD Waterhouse, which was allowed to extend its services agreement with Nexa through the end of 2014.
Penson is represented by Andrew N. Rosenberg and Oksana Lashko of Paul Weiss Rifkind Wharton & Garrison LLP and Pauline K. Morgan, Kenneth J. Enos, Ryan M. Bartley and Ashley E. Markow of Young Conaway Stargatt & Taylor LLP.
The case is In re: Penson Worldwide Inc., case number 1:13-bk-10061, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Lance Duroni. Editing by Richard McVay.
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