New Stream Insurance lenders to reduce claim, contribute $20.3 million

By Caroline Salls

Pittsburgh, July 8 - New Stream Secured Capital, Inc. requested court approval of a settlement with New Stream Insurance, LLC's secured lenders, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

Because the net proceeds from the $124.32 million sale of New Stream Insurance's insurance financing loan and life settlement contract portfolio substantially exceed the secured lenders' claims, the company said the lenders would be entitled to payment of interest and fees on their notes.

"Given the fixed amount of the sale proceeds, the accrual of additional interest during the pendency of these cases would reduce the recovery of [New Stream Insurance's] junior creditors and other stakeholders," the company said in the motion.

According to the motion, the lenders would have a total of $107 million in secured claims as of July 31, including post-bankruptcy interest, costs and legal fees.

As a result, New Stream Insurance and the lenders negotiated a settlement that fixes and allows their claims on terms that are favorable to the New Stream debtors.

New Stream said the settlement will ensure that funds needed to pay unsecured and administrative claims "will not be unnecessarily dissipated through the accrual of additional interest to the NSI secured lenders."

Under the settlement the New Stream Insurance lenders would have $93.75 million in allowed secured claims.

In addition, the lenders have committed to contribute up to $20.3 million of a settlement cash payment.

Specifically, the lenders will acquire claims of designated U.S./Cayman investors for $10.15 million and make a $10.15 million payment to be distributed to all investors in the U.S./Cayman funds who agree to release the lenders and related parties.

"The potential resolution of these significant claims and the provision of the U.S./Cayman cash escrow will be important building blocks around which a potential plan of reorganization can be constructed," New Stream said in the motion.

A hearing is scheduled for July 29.

New Stream, a Ridgefield, Conn.-based investment fund, filed for bankruptcy on March 13. The Chapter 11 case number is 11-10753.

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