First Guaranty Mortgage receives confirmation of Chapter 11 plan

By Sarah Lizee

Olympia, Wash., Nov. 2 – First Guaranty Mortgage Corp.’s Chapter 11 plan was confirmed by the U.S. Bankruptcy Court for the District of Delaware, according to an order filed Wednesday.

The debtors plan to liquidate their remaining assets, wind down their affairs and be dissolved through a liquidating trust.

According to the disclosure statement, the debtors, the cash flow debtor-in-possession lender and the official committee of unsecured creditors were able to reach a settlement on the terms of the plan.

Under the settlement, after payment of senior claims, any residual value in the proceeds of the liquidating trust assets will be distributed to the holder of the cash flow DIP claims, until paid in full, and after that to the holders of general unsecured claims.

Administrative claims, DIP repo loan claims, priority tax claims, priority non-tax claims and other secured claims will be paid in full.

The holders of the prepetition JVB and TCB repo facility secured claims will receive delivery of the mortgage loans and other collateral purchased or securing the claim or the net proceeds of the liquidation of those mortgage loans and other collateral.

The holder of the prepetition Customers repo facility secured claim will receive the right to liquidate the purchased assets and apply the amount received to the prepetition Customers repo facility secured claim, and the obligation to return any excess proceeds or purchased assets to the debtors.

The holder of the prepetition Flagstar warehouse facility secured claim will receive delivery of the mortgage loans and other collateral purchased or securing the claim, or the net proceeds of the liquidation of those mortgage loans and other collateral to the extent consistent with the Flagstar lift stay order.

The holder of the prepetition Customers loan obligation secured claim will receive delivery of the collateral securing the claim or the net proceeds of the liquidation of the collateral.

Each holder of a loan settlement claim will receive an allowed claim in the amount of the cash in their possession and turn over to the debtors any cash beyond that amount.

The holder of the prepetition LVS II offshore guaranty claim will receive up to the amount of $6.59 million of any cash recovered by, or on account of assets turned over to or for the benefit of the debtors, their estates, or the liquidating trust on account of Customers Bank. The holder will not be entitled to a recovery from the GUC share unless and until the cash flow DIP claims and DIP Repo guarantee claims have been paid in full.

Each general unsecured claimholder will receive a pro rata share of the GUC share of the net liquidating trust proceeds.

Interests will be canceled with no distribution to holders.

The Plano, Tex.-based mortgage lender filed Chapter 11 bankruptcy on June 30 under case number 22-10584.

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