Total Finance Investment – Files Amended Plan and Disclosure Statement, Court Approves Disclosure Statement and Schedules June 12 Confirmation Hearing

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April 25, 2019 – The Debtors filed a Revised First Amended Plan and a related Disclosure Statement [Docket Nos. 348 and 349], each of which include redlines showing changes from versions of the documents filed on April 22, 2019 [Docket Nos. 321 and 329, respectively]. 

The Court subsequently (i) approved the adequacy of the Disclosure Statement, (ii) approved Plan solicitation and voting procedures and (ii) scheduled certain dates, including a June 12, 2019 Plan confirmation hearing [Docket No. 350].

The changes to the documents relate primarily to added language and increased prominence concerning the Plan’s release and exculpation provisions, including as to the mechanics for creditors (both those voting and not voting on the Plan) wishing to opt out of those provisions and preserve their rights against the released parties. “Speak now or forever hold your peace,” intones the Disclosure Statement’s prominent new health warning. 

The new language follows an April 16, 2019 objection [Docket No. 312] from the U.S. Trustee for Region 11 who cited concerns as to the release and exculpation provisions. The objection stated, “The Debtors’ fail to provide adequate information to justify the release and exculpation provisions described in the Disclosure Statement. There remains substantial uncertainty about who is providing releases, who is being released, the nature and extent of liabilities to be extinguished, the necessity of each release to the reorganization, and the factual basis for permitting such a release. Further, the Debtors use expansive and vague language in detailing an exculpation clause in the Disclosure Statement, such that the true nature of the provision cannot be determined. The Debtors provide virtually no information to carry their burden to prove an entitlement to these releases and exculpation provisions.”

Plan Overview

The Disclosure Statement notes, “The proposed Plan is the culmination of extensive negotiations by the Debtors, BMO, and Westlake and will maximize the value of the Debtors’ estates. The Plan provides this value through a transfer of servicing of the Portfolio (the ‘Servicing Transfer’) and orderly liquidation of the Dealership business.

The Plan provides that all proceeds from the collection, sale or other disposition of the Debtors’ assets (including, without limitation, the Portfolio and Insurance Receivables) (collectively, the ‘Wind-Down Proceeds’) will be distributable to Holders of Allowed Claims against, and Allowed Interests in, the Debtors. The Plan contemplates that the Wind-Down Proceeds will be distributed as follows:

  • first, to all allowable Administrative Claims, Servicing Fees, and Wind-Down Expenses
  • second, to the First Lien Lender on account of its First Lien Secured Claims until such Claims have been repaid in full with interest;
  • third, to the Second Lien Lender on account of its Second Lien Secured Claims until such Claims have been repaid in full with interest;
  • fourth, to the Third Lien Lender on account of its Third Lien Secured Claims (and only to the extent such Claims are determined to be secured) until such Claims have been repaid in full with interest;
  • fifth, to Holders of Allowed General Unsecured Claims until such Claims have been repaid in full; and
  • sixth, after payment in full of all Allowed Claims against the Debtors, any remaining recoveries from the Wind-Down Proceeds would be distributed to the Debtors’ equity holders.

Importantly, in accordance with the terms of the Restructuring Support Agreement, the Plan is supported by the First Lien Lender and Second Lien Lender, who collectively hold approximately 90.2% of the principal amount of the Debtors’ prepetition funded debt.”

The following is an (unchanged) summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan):

  • Class 1 (“First Lien Credit Facility Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $23.9mn and the estimated recovery is 100% FN1.
  • Class 2 (“Second Lien Term Loan Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $24.0mn and the estimated recovery is 100%.
  • Class 3 (“Third Lien Term Loan Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $6.9mn and the estimated recovery is 100%.
  • Class 4 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
  • Class 5 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
  • Class 6 (“Convenience Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is $12.5k and the estimated recovery is 100%.
  • Class 7 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $9.2mn and the estimated recovery is 100%.
  • Class 8 (“Intercompany Claims”) is unimpaired/impaired and not entitled to vote on the Plan. The estimated recovery is 0%/100%.
  • Class 9 (“Interests in COHI and TFII”) is impaired and entitled to vote on the Plan. The estimated recovery is N/A.
  • Class 10 (“Interests in Subsidiary Debtors”) is unimpaired/impaired and not entitled to vote on the Plan. The estimated recovery is N/A.

Exhibits attached to the Disclosure Statement:

  • Exhibit A: Plan of Reorganization (filed separately)
  • Exhibit B: Corporate Structure Chart
  • Exhibit C: Restructuring Support Agreement
  • Exhibit D: Liquidation Analysis
  • Exhibit E: Financial Projections
  • Exhibit F: Undertaking and Settlement Agreement
  • Exhibit G: Consolidated Financial Statements

Key Dates:

  • Solicitation Deadline: May 6, 2019
  • Voting Deadline: June 5, 2019
  • Plan Objection Deadline: June 5, 2019
  • Confirmation Hearing: June 12, 2019

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