RAIT Financial preferred shareholders ask court to end exclusivity

By Caroline Salls

Pittsburgh, Nov. 22 – An informal committee of RAIT Financial Trust’s preferred equity security holders is asking the U.S. Bankruptcy Court for the District of Delaware to terminate the company’s plan exclusivity, according to a motion filed Thursday.

The committee said RAIT’s exclusivity must be terminated “to preserve the rights of disenfranchised equityholders.”

“There is no reason for this court to allow the debtors to proceed on their plan of reorganization without there being an alternative competing plan providing different and better treatment for creditors and equity stakeholders to consider,” the objection said.

“Doing so would in essence compel estate stakeholders to either accept an unsatisfactory plan or have no recovery at all, clearly an unfair result.”

The committee said it has proposed a fully funded alternative structure for paying claims in full and providing equityholders with far better treatment than that proposed by RAIT and CF RFP Holdings LLC, an entity owned by funds managed by affiliates of Fortress Investment Group LLC.

As part of its proposal, the committee said it, in coordination with Never Summer Holdings LLC, negotiated a commitment letter with Magnetar Capital LLC and its affiliate Magnetar Financial LLC on behalf of one or more funds or accounts managed by MFL and Moab Partners, LP to provide $50 million in plan funding.

The shareholder group said its plan will provide payment to all creditors in accordance with their contractual rights and facilitate the RAIT debtors’ emergence from Chapter 11 with at least $65 million in shareholders’ equity.

“One can only conclude, and RAIT Parent now must concede, that there is a substantial likelihood that equity holders will receive a meaningful distribution if allowed to file the AHC plan,” the motion said.

“At least there would be a meaningful distribution to equity if the debtors were not pursuing a misguided sale process designed to wipe out that substantial quantum of shareholders’ equity for no legitimate reason.”

The committee also asked the court to order the U.S. Trustee overseeing RAIT’s Chapter 11 case to appoint an official committee of equity security holders.

A hearing on both motions is scheduled for Dec. 5.

The real estate investment trust is based in Philadelphia. It filed bankruptcy on Aug. 30 under Chapter 11 case number is 19-11915.

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