A Key Player in WorldCom Bankruptcy Now Found in Chapter 11

MatlinPatterson Global Advisers LLC, an indebted investor who once played a major role in WorldCom Inc. bankruptcy, is now seeking Chapter 11 protection following a string of losses.

Hammered by sour bets on the Brazilian airline industry, the fund on Wednesday filed for bankruptcy in New York with plans to liquidate and return capital to investors. MatlinPatterson Global Partners II LLC, its general partner, also requested Chapter 11.

MatlinPatterson’s fund has been trying to dissolve “for many years,” but it has faced three lawsuits over Brazilian investments that have hampered those efforts, according to one. declaration Dropping by Matthieu doheny, the director of the fund’s restructuring.

The parent company of the fund was co-founded almost two decades ago by David Matlin and Marc Patterson, who worked together in Credit Suisse’s brokerage unit. The company created a sensation almost immediately with WorldCom, the telecommunications company that went bankrupt in 2002 amid an accounting scandal. MatlinPatterson’s large bond holdings enable it to obtain 17% of the equity capital of the reorganized company, named MCI Inc., although it ended up taking a smallest participation.

“Substantial loss”

It made a series of investments in the Brazilian airline industry starting in 2006, which generated a “substantial loss”, according to court documents.

MatlinPatterson’s liabilities include $ 58 million in intercompany promissory notes and $ 423 million in claims arising from the litigation, the statement said. He has $ 142 million in cash. The fund expects to oppose lawsuits and pay lower-ranking creditors in full, according to the liquidation plan.

Funds managed by MatlinPatterson invested in Volo dB, which then bought VarigLog, a freight airline, according to court papers. Variglog filed for chapter 15 bankruptcy in 2009.

Matlin Patterson too bet big on Puerto Rico’s debt, by investing at least $ 150 million from 2015. He was forced to relax these positions and closed its struggling business two years later after its largest investor, Allied World Assurance Co., withdrew its cash. At the time, the fund managed $ 4.5 billion in assets, including about $ 500 million in distressed funds.

After winning big on debt issued by MCI Inc. and Huntsman Corp., the fund struggled with performance due to its investments in Thornburg Mortgage Inc. and the failure of bond brokerage firm Gleacher & Co., Bloomberg News previously reported. In 2014, its $ 1.65 billion fund which closed in 2004 had a negative net internal rate of 28%.

He listed assets between $ 50,001 and $ 100,000, and liabilities up to $ 50,000 in a Chapter 11 petition filed in the Southern District of New York.

The case is MatlinPatterson Global Opportunities Partners II, 21-11255, United States Bankruptcy Court, Southern District of New York (Manhattan).

–With the help of Jeremy Colline and Michel B. Marois.

To contact the reporter on this story:
Allison McNeely in New York at amcneely@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Nick Baker, Dawn McCarty

© 2021 Bloomberg LP All rights reserved. Used with permission.

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