Novation Companies Bankruptcy Objections Filed


Deutsche Bank National Trust Company and Bank of New York Mellon Trust Company filed with the U.S. Bankruptcy Court separate objections to Novation Companies’ Second Amended Joint Chapter 11 Plan of Reorganization.

Deutsche Bank National Trust Company asserts, “Without providing any factual or legal justification, the Debtors’ Plan improperly and unfairly establishes a separate class for the claims of only a few creditors, including the Trustee’s claims, and proposes to treat them drastically worse than other similarly situated general unsecured creditors. Because the Plan improperly classifies and unfairly discriminates against the Trustee’s claims, the Plan fails to satisfy the Bankruptcy Code’s standards for confirmation and should not be confirmed. Even assuming the Court determines that separate classification of general unsecured claims is appropriate, the Trustee’s claims are more appropriately classified as General Unsecured Claims and not RMBS Litigation Claims, as there is no similarity between the Trustee’s claims and the other claims the Debtors have classified as RMBS Litigation Claims.”

In addition, “Moreover, the Debtors’ proposed treatment of RMBS Litigation Claims more severely prejudices the Trust than the other holders of RMBS Litigation Claims. The Trust is a securitization trust that is designed to amortize down and liquidate. The Trust had originally issued nearly $1.9 billion in securities. As of April 2017, there were only $491 million in securities, with that total amortizing down every month. In addition, under the Trust’s governing documents, the Trust’s servicer is entitled to liquidate the Trust when the loan balances in the Trust are equal to or less than 10% of the original value of the Trust. As of April 2017, the loan balance percentage was under 21% and reducing every month. The Trust, which has a limited life, is reducing in size each month and, at some point in time, will be liquidated. Payment of claims over a ten-year period, therefore, runs the possibility of prejudicing the liquidation of the Trusts and its beneficiaries.”

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