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November 16, 2021 – The Court hearing the Corp Group Banking cases has extended the periods during which the Debtors have an exclusive right to file a Plan and solicit acceptances thereof, through and including January 7, 2022 and March 10, 2022, respectively [Docket No. 338]. Absent the relief, the Plan filing and solicitation periods were scheduled to expire on October 25, 2021 and October 27, 2021, respectively.
The Court's order over-rules a limited objection from Brazilian banking giant Itaú Unibanco S.A. ("Itaú Unibanco;" the Debtors hold shares in Chilean and Colombian Itaú Unibanco affiliates) which notes that it is the Debtors' "largest secured and unsecured creditor, owed approximately $1.26bn" and contendss that the Debtors have botched their chance to accomplish what should have been a rather straightforward stay in Chapter 11. Itaú Unibanco argues that "If agreement on a consensual plan cannot be reached in the next 45 days, the appropriate action will be either a cramdown plan or a conversion to a chapter 7 liquidation….
The Debtors defaulted on the bonds on September 15, 2020. More than a year later, they do not appear to be any closer to a deal with their bondholders. In fact, the bondholders, emboldened by their exclusive control of an official committee and their related ability to finance their fishing expedition for potential litigation claims through spending the Debtors’ limited unencumbered assets rather than their own money, are rapidly dissipating the only assets the Debtors have to distribute."
On a more positive note, the Debtors, who had hoped to source DIP financing so that they could exercise subscription rights issued by Itaú Corpbanca have continued to close on sales of those rights to third parties who otherwsie have the wherewithal to exercise them.
The Requesting Motion
Debtors requesting motion [Docket No. 287] notes that the Debtors have abandoned plans to finance the exercise of subscription rights through debtor-in-possession financing in favor of instead "monetiz[ing] the subscription rights through sales that are expected to close within the next few weeks."
In addition, the Debtors state that negotiations with the holders of their 144A Notes, Banco Itau and their official committee of unsecured creditors, while progressing, are "complicated by an imminent election in Chile, which the Debtors believe is creating macroeconomic uncertainty that may be adversely affecting the value of their estates."
The extension motion explains, “…as the Debtors have advised the Court, there is still work to be done. Since the commencement of these proceedings, the Debtors have made substantial progress in negotiating a global resolution of these Chapter 11 Cases with an ad hoc group of holders of the Debtors’ 144A Notes (the 'Ad Hoc Group'), Itaú and the Committee. With that objective in mind, the Debtors recently provided a draft chapter 11 plan to Itaú and the Committee, and over the next months will be working to finalize what the Debtors hope will be a consensual chapter 11 plan.
These negotiations are complicated by an imminent election in Chile, which the Debtors believe is creating macroeconomic uncertainty that may be adversely affecting the value of their estates. In short, the Debtors have made significant progress and expect to present a confirmable and viable chapter 11 plan in the near term, but the Debtors need a modest extension of their exclusive periods to propose and seek confirmation of a plan.
An extension of the Exclusivity Periods is also warranted because the Debtors’ monetization of their subscription rights represented a significant unresolved contingency in these Chapter 11 Cases that the Debtors were compelled to resolve prior to proposing a plan. As the Debtors have previously disclosed, the Debtors considered proposals to finance the exercise of certain of their subscription rights with debtor-in-possession financing provided by existing creditors, but ultimately determined to monetize the subscription rights through sales that are expected to close within the next few weeks. If the Debtors had instead incurred tens of millions of dollars in debtor-in-possession financing, the terms of the Debtors’ proposed chapter 11 plan would have changed materially.
Prior to entry of an order approving the sale of the subscription rights, the Debtors could not move much beyond the preliminary stages of the plan process. With the order in hand, the Debtors have circulated a proposed chapter 11 plan and are moving toward negotiating final terms. In short, premature termination of the Exclusive Periods would undermine the Debtors’ efforts to organize plan negotiations among their key constituents, harming the value of their estates and the progress of the Chapter 11 Cases. In light of the good faith progress that the Debtors have made during the initial months of these Chapter 11 Cases and the ongoing plan negotiations, the Debtors believe that the relevant factors strongly support a short extension of exclusivity.”
The hearing on the exclusivity motion is scheduled for November 23, 2021, with objections due by November 4, 2021.
The Itaú Unibanco Limited Objection
Itau Unibanco argues: "These chapter 11 cases involve five financial holding companies whose sole business is the ownership of minority shares in a Chilean bank, Itaú Corpbanca, and its Colombian subsidiary, Itaú Corpbanca Colombia. The Debtors have no operating business, no employees, and no connection with the United States except for a New York law-governed indenture and retainer amounts that were deposited with Young Conaway and Simpson Thacher in connection with their roles as bankruptcy counsel. The purpose of these cases is not to reorganize as a going concern, but rather to distribute the Debtors’ assets to their creditors. The basic presumption Congress set out in section 1121 of the Bankruptcy Code is that 120 days is enough time to propose a plan. That goal was entirely achievable in this case.
Itaú appreciates that the Debtors have requested this extension because they would like the opportunity to attempt to resolve these cases consensually. While this is commendable, the fact is that the Debtors have already spent over a year trying to reach a consensual resolution with the bondholders. The Debtors defaulted on the bonds on September 15, 2020. More than a year later, they do not appear to be any closer to a deal with their bondholders. In fact, the bondholders, emboldened by their exclusive control of an official committee and their related ability to finance their fishing expedition for potential litigation claims through spending the Debtors’ limited unencumbered assets rather than their own money, are rapidly dissipating the only assets the Debtors have to distribute.
This situation should not be allowed to persist much longer. Although Itaú does not object to a short extension of the exclusive period to permit the Debtors one last shot at reaching a consensual resolution, these cases must be brought to a conclusion. If agreement on a consensual plan cannot be reached in the next 45 days, the appropriate action will be either a cramdown plan or a conversion to a chapter 7 liquidation.
About the Debtors
According to the Debtors: “Corp Group Banking S.A. (‘CGB’) and Inversiones CG Financial Chile Dos S.P.A. (‘CGFC 2’ and, together with CGB, the ‘Debtors’) are subsidiaries of Corp Group (‘Corp Group’), domiciled in Chile and headquartered in Santiago, Chile. The Debtors own approximately 26.2% of the common equity of Itaú Corpbanca (‘Itaú Corpbanca’), a publicly traded Chilean bank controlled by Itaú Unibanco S.A. and its affiliates (collectively, ‘Itaú’). They also own, directly and indirectly, approximately 10.3% of the common equity of Itaú Corpbanca Colombia S.A., a Colombian bank subsidiary of Itaú Corpbanca (‘Itaú Corpbanca Colombia’ and together with Itaú Corpbanca, the ‘Bank’).”
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