Defunct lender’s creditor plan OK
New Century Financial Corp., once the second-biggest sub-prime mortgage lender in the U.S., won court approval Wednesday for a bankruptcy liquidation plan that pays unsecured creditors as much as 17 cents on the dollar.
U.S. Bankruptcy Court Judge Kevin J. Carey in Wilmington, Del., said in a ruling that payments under the defunct Irvine company’s plan were “fair and equitable and would provide benefits to the entire creditor body.”
New Century filed for bankruptcy protection in April 2007 after state regulators revoked its lending licenses, federal officials started two investigations and shareholders filed more than 25 lawsuits claiming securities violations. The company has said it probably misstated profit in 2005 and 2006 and it will eventually restate earnings.
The liquidation plan proposes paying about $194 million to thousands of creditors who claim that they are owed as much as $35 billion.
New Century said that amount should shrink to about $2 billion once Carey rules on which debts are legitimate.
Creditors may recover from 2.2% to 17.1% of their claims, Carey said in his opinion, citing New Century estimates.
In a separate ruling, Carey on Tuesday approved a settlement that gives Bank of America Corp. the chance to collect as much as $18.8 million each for five claims the company has filed in New Century’s bankruptcy case.
The debts, which under the settlement will total almost $94 million, were related to loan repurchase agreements New Century had signed with the bank.
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