New Stream Secured Capital files amended plan, disclosure statement

By Caroline Salls

Pittsburgh, Feb. 14 - New Stream Secured Capital, Inc. filed an amended plan of reorganization and related disclosure statement Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, New Stream made a pre-packaged Chapter 11 bankruptcy filing in March 2011 to implement a plan that called for the $127.5 million sale of the company's portfolio of life settlement contracts to MIO Partners, Inc.

MIO Partners is an affiliate of several investors in New Stream's U.S. and Cayman Islands funds.

The net asset sale proceeds were to be allocated to New Stream's secured creditors under the pre-packaged plan.

The company said in the amended disclosure statement that it did not move forward with solicitation of the original plan, and all votes on that plan will be null and void.

Under the amended plan, New Stream's assets will be liquidated, and the net proceeds will be distributed to creditors.

In addition, the company said the amended plan calls for the voluntary settlement and release of intercreditor claims and establishes a mechanism for the interim management and liquidation of the debtors' assets.

As part of the solicitation of the amended plan, U.S.-Cayman investors will be asked to consider whether they want to be bound by the provisions of the plan providing for the releases of third-parties.

Consenting investors electing to grant those releases will be entitled to share in a cash payment to be paid in addition to any amounts to be distributed to U.S.-Cayman investors for their claims or any amounts distributed to class 2 creditors from a U.S.-Cayman estate cash payment.

Investors who agree to grant the proposed release will receive a payment from a global settlement fund that is calculated based on the ratio that each releasing investor's percentage share bears to the total percentage of shares to which all releasing investors will be agreeing to be bound.

Creditor treatment

Treatment of creditors under the amended plan will include

• Holders of administrative claims and other priority claims will be paid in full in cash;

• Holders of intercompany claims will receive no distribution;

• Holders of Bermuda non-C, F and I claims will receive all of the available cash and class A interests in wind-down entities;

• Holders of U.S.-Cayman claims will receive a beneficial interest in the liquidating trust, their share of the actual distributions from the liquidating trust to which the insider released parties who are released on the effective date would have been entitled and a percentage share of pre-effective date net liquidation proceeds.

The liquidating trust will receive all class B interests in the wind-down entities, and holders of U.S.-Cayman claims will receive periodic distributions from the trust;

• Holders of general unsecured claims against New Stream Insurance, LLC (NSI) and New Stream Capital LLC (NSC) will receive cash remaining in those estates after payment in full of administrative and priority claims;

• Holders of New Stream Secured Capital LP (NSSC) debtors' general unsecured claims will receive a share of up to $100,000 in cash;

• Holders of New Stream Secured Capital, Inc. (NSCI) debtors' general unsecured claims will receive no distribution;

• Interests in NSI, which are held by NSSC, will be extinguished in exchange for the transfer to NSSC of all cash remaining in the NSI estate after the payment into a disputed claim reserve, as well as the transfer to NSSC of all assets held by NSI;

• Holders of interests in NSSC and NSCI will receive no distribution; and

• Holders of NSC interests will retain those interests.

Plan comparison

Treatment of creditors under New Stream's pre-packaged plan was scheduled to include

• Holders of NSI Bermuda lender claims would have received net proceeds from the portfolio sale in accordance with an allocation to be agreed upon between Bermuda fund receivers and a Bermuda court;

• Holders of NSSC Bermuda lender claims would have received remaining sale proceeds in accordance with an allocation agreed to between the receivers and the Bermuda court, as well as substantially all of the remainder of the NSSC assets, except those being reserved for holders of U.S./Cayman funds class claims;

• Holders of U.S./Cayman funds class claims would have received a share of periodic distributions from the net proceeds from the liquidation of wind down assets, as well as a global settlement cash payment if they voted to accept the plan and granted third-party releases;

• Holders of NSI and NSCI general unsecured claims would have been paid in full;

• Holders of NSC general unsecured claims would have received a share of a $200,000 cash distribution;

• Holders of NSSC general unsecured claims, NSSC interests and NSC interests would have received no distribution; and

• Interests in NSI currently held by the NSSC debtor would have continued to be held by NSSC, and interests in the NSCI debtor currently held by Cayman funds would have continued to be held by those funds.

The disclosure statement hearing is scheduled for March 12.

New Stream, a Ridgefield-Conn.-based investment fund, filed for bankruptcy on March 13, 2011. Its Chapter 11 case number is 11-10753.

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