Updated October 20, 2016
The Confirmation Hearing commenced on August 29, 2016. At the start of the hearing, Transparency Alliance withdrew its plan from consideration in view of the vote results and the inability of its witnesses to defend its assertions with regard to the supposed “wealth effect” and need for ten years of financing. Even so, there are some parties who continued to object to confirmation of the sole remaining plan. They drew out the hearing until September 30, 2016, at which point the Court took the matter under advisement. On October 7, 2016, the Court announced in open court its decision to overrule nearly all of the objections and adopt the Trustee’s Plan, provided that Vida agreed to certain minor modifications to the proposed servicing agreement. On October 14, 2016, the parties announced that Vida would accept the modifications. Work is presently ongoing to reduce the Court’s ruling to a formal confirmation order. Assuming that order is entered sometime next week, the Plan will go effective in late November. Once the Plan goes effective, the Committee will cease to exist, and this website will be taken down. The Committee expects that the new trusts will thereafter establish other means of keeping investors apprised.
The Official Committee of Unsecured Creditors (“Committee”) has created this website as a means of communicating with holders of fractional interests in life settlements provided by Life Partners, Inc. (“LPI”), which is a subsidiary of Life Partners Holdings, Inc. (“LPHI”) collectively (“Life Partners”). This website has become necessary because thousands of interested parties have contacted members of the Committee. Many of these inquiries and suggestions run along similar lines, such that the information provided through this website may prove helpful.
LPHI filed bankruptcy in January, 2015. The Committee was appointed shortly thereafter by the United States Trustee (“UST”). The Committee is comprised of three policy investors.
During February, 2015, the Bankruptcy Court considered whether to appoint a Ch. 11 Trustee. A full evidentiary record was developed, and the Bankruptcy Court ultimately decided that a trustee was necessary for reasons that the Judge explained in open court – see Transcript.
In March, 2015, Tom Moran was appointed as the Ch. 11 Trustee (“Trustee”). Mr. Moran has been involved with servicing life settlements since 1999. More information is available concerning Mr. Moran on the website of his company, Asset Servicing Group.
During April, 2015, the Trustee conducted an investigation into Life Partners.
In May, 2015, the Trustee placed LPI into bankruptcy, and released a Declaration that presented the results of his initial investigation. Among the Trustee’s findings was that less than 100% of the investors were responding to premium calls, and that, as a result, many policies were at risk of lapse – see Initial Lapse/Grace Report.
In June, 2015, the Trustee received approval to alter the premium payment strategy from paying level premiums to paying the minimum cost of insurance. This strategy took advantage of the reserves that had accumulated within the policies, and provided premium relief to many investors. This strategy also avoids the loss of these accumulated cash reserves in the event of a maturity, and is the strategy followed by the overwhelming majority of participants in the life settlement industry.
In early July, 2015, the Trustee’s request for approval to borrow cash reserves in one policy to fund premiums in other policies. This request was made in order to preserve policies that could not be preserved by altering the premium strategy. The Trustee argued that LPI had the right to take this action in order to preserve the policies during the bankruptcy because LPI was recorded at the carrier as the owner of the policy, and thus had the right, under insurance law, to borrow from the cash reserves. Many investors objected, however, stating that this approach encroached upon their rights to individual beneficial ownership of particular policies. The Court tabled this so-called “ownership” dispute, ruling that the determination of this dispute would require a full adversary proceeding, which is a procedure comparable to a full federal lawsuit.
In July and August, 2015, the Trustee held meetings with industry participants and interested investor groups in an effort to formulate a strategy for preserving the policies and reorganizing Life Partners. The Committee first created this website at that time. The original home page detailed nature of the issues and the range of possible solutions.
In September, 2015, the Trustee, the Committee and certain investor groups (the “Plan Supporters”) announced an agreement to pursue a reorganization plan ("Plan") outlined in an agreed term sheet, and an agreement to utilize maturities, during the bankruptcy proceedings, to provide interim financing for premiums, operations, and the costs of documenting and obtaining approval of the proposed Plan. However, with regard to the merits of this Plan, the Committee entered into a quiet period due to the rules set forth in the Bankruptcy Code concerning the solicitation of a Plan. The Bankruptcy Code requires that interested parties be provided with a detailed disclosure statement approved by the Bankruptcy Court as containing "adequate information" in order to allow creditors to make an informed decision in voting on whether to accept or reject a proposed plan, and that must be sent along with a proposed plan. Efforts therefore turned to obtaining the agreed upon interim financing, and the preparation and presentation to the Bankruptcy Court of the proposed Plan and related disclosure statement.
In October, 2015, the Court granted interim financing. As a result of this financing and as a result of further premium optimization efforts, policies have been and continue to be preserved during these bankruptcy proceedings.
In November, 2015, efforts to convert the term sheet to a proposed reorganization plan commenced in earnest among the Trustee, the Committee and the Plan Supporters.
In December, 2015, an initial draft of the reorganization plan and accompanying disclosure statement were filed, but the documents lacked a number of essential exhibits. As a result, the Trustee passed an initial disclosure statement approval hearing. In January, 2016, additional exhibits were filed that provided financial information concerning the plan. However, there remained certain essential documents upon which agreement had not yet been reached among the Trustee, the Committee, and the Plan Supporters.
In February, 2016, a number of the remaining points of disagreement were resolved, but not all of the essential documents were tendered, and therefore the Trustee passed a rescheduled disclosure statement approval hearing.
In March, 2016, the final elements of the plan and disclosure statement documents, as well as certain solicitation materials, were presented for approval.
On April 18, 2016, the Court approved a disclosure statement for what is now the Trustee Plan, and approved certain content for this website, as well as updates as needed for this site. The approval of the disclosure statement was subject to the further approval of a class action settlement that is integrated with the plan.
At the April 18, 2016, hearing, certain parties again asked the Court to slow down the process, which the Court refused to do.
On May 19, 2016, the Bankruptcy Court granted the Trustee’s motion seeking leave to enter into the class settlement. On May 27, 2016, the District Court preliminarily approved the class action settlement.
On June 22, a third amended version of the Trustee Plan was filed that incorporated into it certain exit financing and servicing elements provided by Vida Capital, Inc. and/or its affiliates. This combination set aside the Vida plan.
On June 30, 2016, the Bankruptcy Court entered an order permitting solicitation of the Trustee Plan.
On July 8, 2016, the Court considered and approved in principle a disclosure statement for a competing plan tendered by Transparency Alliance.
On July 15, 2016, the Trustee Plan was sent to investors.
On July 22, 2016, the Transparency Plan was sent to investors.
Solicitation concluded on August 23, 2016. The vote strongly favored the Trustee’s Plan.
The Confirmation Hearing commenced on August 29, 2016. On the first day, Transparency withdrew its plan. Certain parties still objected to confirmation of the sole remaining plan, however, which led to a protracted Confirmation Hearing.
On October 7, 2016, the Court announced its decision to confirm the Trustee’s Plan.
The Plan is expected to go effective in late November, at which point, the Committee will have completed its work and will be dissolved.