Novation Bankruptcy Objection Filed


Deutsche Bank National Trust filed with the U.S. Bankruptcy Court an objection to Novation Companies’ settlement by and among the Debtors, the noteholders and the creditors’ committee.

The objection asserts, “Although the Trustee is a creditor of both Novation and NMI, the claims the Trustee holds against each of the Debtor Defendants arise from distinct and distinguishable legal obligations, as discussed in more detail herein. Thus, the entire premise underlying the Motion – that there is no harm to creditors of NMI because all creditors classified in Class 4(b) under the confirmed Plan have identical claims against each of the Debtor Defendants – is fundamentally flawed. Once the Trustee’s claims are determined by the New York Court, it is plausible that the Trustee may have a judgment against NMI, but not Novation.”

In addition, “The proposed settlement conflates the identity of Novation and NMI, two distinct legal entities, and attempts to strip the sole asset held by NMI, for the benefit of a single class of Novation creditors – the Class 2 Noteholders. Notably, there is no settlement agreement or term sheet attached to the Motion, setting forth the actual terms of the “Settlement”. Rather, the Motion only refers to the confirmed Plan in the Novation case, without any comprehensive term summary.”

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