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Vesttoo creditors seek to minimise Aon & equity holder bankruptcy plan votes


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The Committee of Unsecured Creditors in the Chapter 11 bankruptcy case of insurtech Vesttoo have objected to broking group Aon being allowed multiple votes on the proposed plan of bankruptcy, while also saying claims from equity holders in certain Vesttoo structures should be denied votes completely.

vesttoo-collateral-loc-fraudAs we reported recently, the plan of reorganisation under Chapter 11 for Vesttoo’s impending bankruptcy was conditionally approved by the Delaware court judge and so can proceed to a vote among the creditors.

The official Committee of Unsecured Creditors all get their votes, of course, but there is some disagreement over how the number of claims an organisation has made against the bankruptcy should play into the influence it could wield over the eventual voting and approval process.

Because of this, the official Committee of Unsecured Creditors have filed their objection to many of the claims made by insurance and reinsurance broking group Aon and certain subsidiary entities.

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They state that Aon and its entities have made hundreds of claims against Vesttoo’s bankruptcy estate, many of them duplicative.

Some of these have been filed via the joint provisional liquidators (JPL’s) assigned to White Rock Insurance (SAC) Ltd. in the Bermuda court case that ensued some months back.

Claims from Aon and the JPL’s amount to over $3.1 billion in value, it seems, a figure well beyond any recovery that can be hoped for under the bankruptcy process, given how little value remains in the Vesttoo business.

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But the creditor committee appear to be concerned that claims levelled by Aon and the JPL’s could resulting in them having additional votes on the bankruptcy plan and so more influence over it. So, they are objecting to them and asking the court to deny, or downgrade the priority of the majority of claims made.

There has now been an agreement and an order entered in the court, to allow the committee of creditors more time to file an objection to the hundreds of claims that have been made by the JPLs on behalf of Aon entities. The JPLs also have an extended time frame to subsequently reply to this.

The creditor committee want the JPL claims reclassified as General Unsecured Claims and disallowed for purposes of voting on the Vesttoo bankruptcy plan, while they are disputing the validity of the duplicative claims made by other Aon entities, it seems.

One filing states, “If Aon is allowed to vote each Disputed Claim, it could single-handedly control whether acceptance and confirmation of the Plan is denied, a result that is manifestly unfair to the Cedents and other valid creditors who were victimized by the fraud, particularly given the duplicative nature of the Disputed Claims.”

In addition, the creditors note that disallowing these claims will “protect the voting process and the orderly resolution of these Chapter 11 Cases.”

At the same time, the official Committee of Unsecured Creditors is also objecting to claims made by some equity holders that have interests in certain Vesttoo investment structures.

These equity holders seem a mix of entities and investors that have provided funding in one or another of Vesttoo’s seed or venture rounds over the insurtech’s lifespan.

But these claims do not deserve a vote on the bankruptcy plan, in the creditor committee’s opinion.

“Based on the allegations in the Disputed Claims, the holders of the Disputed Claims do not hold claims at all, but instead hold equity interests in Debtors Vescor Bay, L.P. or Vesttoo Ltd. Equity interests are not claims and, thus, do not entitle the holders to vote on the Plan. Even if it was determined that the Disputed Claims assert more than equity interests (which they do not), the asserted claims should be subordinated under section 510(b) of the Bankruptcy Code or otherwise disallowed,” the committee’s filing states

As a result, these disputed claims to the bankruptcy estate of Vesttoo should be recategorised as interests, the creditors believe.

Further stating, “The Disputed Claims represent equity interests, not a “claim” against the Debtors, and should be disallowed for purposes of voting on the Plan.”

As we’ve reported before, there seems little chance that creditors are going to be particularly satisfied with the amount of value that can be recovered from Vesttoo’s bankruptcy, as documents show that the eventual recovery for creditors may be minimal and certainly well-below the level of claims made against the estate.

Remember there is also litigation ongoing, currently involving Clear Blue Insurance and Aon, with a chance of more erupting, as creditors look to other avenues to recover some of the significant value lost due to the letter of credit reinsurance collateral fraud that occurred.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

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