Reverse Mortgage committee objects to Leadenhall DIP financing

Chicago, Dec. 30 – Reverse Mortgage Investment Trust Inc.’s official committee of unsecured creditors objected to the debtors’ motions to obtain post-petition financing, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

Reverse Mortgage had previously proposed, from a heavily amended second DIP order, $124.5 million in post-petition financing partly made up of $44.5 million in DIP notes via Leadenhall and BNGL. As previously reported, the company was able to access $34.5 million of the notes after an interim order. The company was later able to access a $10 million roll-up of prepetition debt owed to Leadenhall, which would convert on a cashless dollar-for-dollar basis into the DIP notes.

The committee notes that it believes as of Friday, Leadenhall has only advanced an initial $999,999 of its $17.5 million new money commitment under the DIP notes facility following the second interim DIP order.

The company’s original DIP proposal was with parent company BNGL Holdings, LLC and existing lender Leadenhall Capital Partners LLP, which aimed to provide the liquidity needed to transfer the Ginnie Mae HECM MSR business to Longbridge Financial, LLC, and subsequently conduct an orderly winddown of the Chapter 11 cases following the transition.

However, the committee now objects to the post-petition financing as the transfer that was intended has not happened and will not happen.

The parties were unable to reach consensus regarding the terms of the transfer, which resulted in alleged defaults under the Ginnie Mae contract.

After the Ginnie Mae deal fell apart, Leadenhall informed the debtors that all DIP obligations owed by the debtors to Leadenhall were immediately due and payable and that their commitment to extend financing under the DIP facilities was terminated.

The committee says that because of the failed transfer and the subsequent termination of commitments under the notes facility, Leadenhall should no longer be considered a DIP lender in any context except for the initial funding, and only the initial funding that was used by Reverse Mortgage for ongoing operations.

In exchange for the financing, Reverse Mortgage was providing Leadenhall with accommodations and protections. The committee says those objections should be stricken from the final order as Leadenhall is receiving substantial benefits based upon a default of its own making.

Fees associated with the notes and the transfer should not be shouldered by the estate, in light of the circumstances, the committee adds.

The $10 million roll-up should also be canceled, according to the objection.

The Bloomfield, N.J.-based reverse mortgage issuer filed Chapter 11 bankruptcy on Nov. 30 under case number 22-11225.

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