Fri 12/30/2022 15:56 PM
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Relevant Documents:
Joint Motion
Notice of Settlement (Dec. 30) (EMMA)

The Christian Cares Center debtors, the official committee of unsecured creditors and bond trustee UMB Bank filed a joint motion today seeking approval of a settlement of the UCC’s suit challenging the trustee’s bond claim and the extent of its prepetition liens. The settlement was reached at a Dec. 6 mediation session with retired bankruptcy Judge Harlin D. Hale and, if approved, would resolve all claims set forth in the UCC’s adversary proceeding.

The settlement term sheet, which is attached as Exhibit A to the motion, provides for the allowance of the trustee’s bond claim in the amount of $54.05 million, with the trustee’s prepetition liens being deemed valid and perfected.

Under the settlement, the debtors will make a cash deposit of $150,000 into a general unsecured creditors distribution account, or GUC account, on the plan effective date. In addition, proceeds of certain of the debtors’ other assets will be placed into the GUC account, including ownership interests in the Ziegler Link Age Fund II, debtor Christian Care Centers Foundation’s brokerage account and the debtors’ off-campus mineral interests, which comprise the mineral interests other than those located under the Mesquite, Fort Worth and Allen communities.

Five percent of the proceeds of the debtors’ employee retention credit will also be placed into the GUC account. The parties would exchange mutual releases with respect to the bond claim, the Series 2014 and Series 2016 bonds issued in connection with the Christian Care Centers Inc. project, and the DIP bonds.

The settlement also provides that plan consummation costs of up to $4.2 million would be funded from the net proceeds of the sale of substantially all of the debtors’ assets to North Texas Benevolent Holdings LLC. Any amounts reserved for plan consummation costs and not ultimately expended would be turned over to the trustee for distribution on account of the bond claim.

Once the term sheet is approved by the court, the UCC and the trustee would enter a stipulation for a stay of the adversary proceeding until the completion of the chapter 11 cases.

In a notice to bondholders posted to EMMA this afternoon, the trustee explains that the settlement “clears the way for Plan confirmation without the risk, expense and delay of additional litigation, including the prospect for a material delay in distributions to Bondholders if litigation had proceeded, and provides for timely distributions to Bondholders under the Plan.”

The bond trustee adds that other than the cash pool of $150,000, most of the assets being made available for distribution to general unsecured creditors under the settlement “will take time and expense to liquidate” and include “litigation claims for certain preferences and other voidable transfers under the Bankruptcy Code, certain illiquid investment assets and mineral rights of the Debtors, and a claim to certain federal pandemic relief funds with a maximum value of less than $100,000.” Although the net value of the assets in this pool after costs of disposition “is difficult to ascertain,” the trustee says, such value “is not expected to be material under any circumstances in relation to the distributions Bondholders will receive under the Plan.”

The debtors’ combined DS approval and plan confirmation hearing is set for Jan. 30. The court conditionally approved the debtors’ DS on Nov. 30.

Proposed Revisions to Plan

The motion states that the current plan will be amended to provide for treatment of allowed secured lender claims (Class 5) and general unsecured claims (Class 7) consistent with the term sheet. The revised plan language and redline are attached to the proposed order approving the settlement motion and include the following revised proposed treatment for classes 5 and 7:

Class 5

Class 7
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