Corp Group Banking S.A. – Further to Stipulation Agreed with Creditors’ Committee, Holders of Itaú Equity Granted Second Extension of Exclusivity Periods

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February 16, 2022 – The Court hearing the Corp Group Banking cases has extended (for a second time) the periods during which the Debtors* have an exclusive right to file a Plan and solicit acceptances thereof, through and including April 25, 2022, or seven days following the conclusion of the hearing on confirmation of the
Debtors’ Plan (April 11th as currently proposed), whichever is later [Docket No. 542].

Absent the relief, the Plan filing and solicitation periods were scheduled to expire on January 7, 2022 and March 10, 2022, respectively. NB: The Debtors had requested March 24, 2022 (filing) and May 25, 2022 (solicitation) as expiration dates for the two periods.

*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.

The Debtors filed a Second Amended Plan of Liquidation and a related Disclosure Statement [Docket Nos. 525 and 526, respectively] on February 14th. 

The revised Disclosure Statetment noted a truce of sorts with the Debtors' Official Committee of Unsecured Creditors (the "Committee") further to which the Committee will not continue to object to the Debtors' Disclosure Statement and solicitation procedures and will allow the Debtors to proceed towards Plan confirmation subject to the Committee's preservation of "claims and challenges" (with these enuring to a proposed Litigation Trust). 

Also agreed in the Stipulation (filed at Docket No. 529) which memorializes the settlement of issues with the Committee, were the withdrawal of an objection to the Debtors' exclusivity extensions and a cross-motion to terminate exclusivity.

The other matter being heard at the Debtors' February 16th hearing was approval of the Debtors' Disclosure Statement with the sole remaining obstacle to that approval being an objection filed by the U.S. Trustee assigned to the Debtors' cases which took issue with "nearly incomprehensible" disclosure as to third party releases and a lack of any sort of opt-out mechanism in respect of those releases.

Background

Events Leading to the Chapter 11 Filing

In their declaration the Debtors detailed the events leading to Inversiones CG Financial Chile Dos’s Chapter 11 filing. The Declaration provides: “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'). The Debtors’ revenue is almost exclusively dependent on dividends paid by the Bank….

Over the past several years, the financial performance of the Bank has deteriorated dramatically. In turn, the share price of Itaú Corpbanca has decreased, and the Debtors have received far smaller dividends than expected when CGB issued the Notes and incurred obligations to Itaú. Based on the current condition of the Bank, the Debtors are unable to repay their obligations in full.

Beginning in the third quarter of 2020, the Debtors and their subsidiaries (collectively, 'Corp Group Financial') urged their two primary creditor constituencies — Itaú and an ad hoc group of Noteholders (the 'Ad Hoc Group') — to engage in discussions aimed at achieving a consensual restructuring or orderly liquidation of Corp Group Financial. While Itaú has participated in difficult negotiations with Corp Group Financial for several months, the Ad Hoc Group has been unwilling to negotiate on the basis of Corp Group Financial’s proposals. Over the past several weeks, Corp Group Financial has had productive discussions with Itaú on the terms of a transaction to be implemented through Chapter 11 proceedings. In recent days, rumors of a potential transaction have begun to leak into the Chilean press.

In January 2021, certain Noteholders in the Ad Hoc Group commenced proceedings in Santiago, Chile (the 'Chilean Action') by filing a pre-judicial discovery motion requesting certain information from CGB and certain of its affiliates. On June 15, 2021, the Ad Hoc Group filed a complaint in the Chilean Action seeking to avoid numerous transactions made by CGB over the past seven years, and on June 23, 2021, the Ad Hoc Group filed a request for an emergency injunction appointing an administrator over CGB and freezing its assets (including assets that are pledged to Itaú and other secured creditors).

The Debtors believe — and will ultimately demonstrate — that the claims asserted by the Ad Hoc Group are without merit. Unfortunately, the Ad Hoc Group’s attempts to collect on their unsecured claims3 have forced the Debtors to expedite the filing of these Chapter 11 cases (the 'Chapter 11 Cases') to protect the value of the Debtors’ estates and to ensure that all of their creditors are treated fairly, in accordance with their respective priority under applicable law."

The Declaration further explains, "The Debtors intend to continue to pursue a consensual transaction during the Chapter 11 Cases. While the Ad Hoc Group’s decision to pursue litigation over negotiation is unfortunate, the Debtors are hopeful that the breathing room created by the automatic stay and exclusivity will encourage all of their stakeholders to engage in negotiating a fair, orderly and fully-consensual wind down of Corp Group Financial."

Prepetition Indebtedness

As of the Petition Date, the Debtors’ capital structure consists of the following debt obligations of CGB. The Debtors have no trade debt.

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')."

Corporate Structure Chart

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