Tue 12/28/2021 15:33 PM
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Relevant Documents:
Plan
Disclosure Statement
DS Approval Motion
Colombia Transactions Motion
Unencumbered Shares Sale Motion

The Corp Group Banking debtors yesterday, Monday, Dec. 27, filed a chapter 11 plan of liquidation, disclosure statement and two motions to effectuate related transactions to liquidate and distribute their assets. The DS approval motion recounts that the debtors are subsidiaries of the Corp Group conglomerate and that their “primary assets” are (i) shares comprising about 14.3% of the common equity of Itaú Corpbanca, a publicly traded bank controlled by Itaú Unibanco SA, and (ii) about 10.3% of the common equity of Itaú Corpbanca Colombia, a Colombian bank subsidiary of Itaú Corpbanca.

The debtors say Itaú is entering into an agreement to support and vote its claims in favor of the plan. According to the DS, the debtors’ “two primary creditor constituencies” are Itaú and the 6.75% unsecured notes due 2023 issued by debtor Corp Group Banking SA, or CGB.

The DS includes the following “simplified” organizational chart:
 

The disclosure statement provides the following overview of transactions contemplated under the plan, which would “allow the Debtors to wind down their operations and investments and distribute their assets to their creditors”:
 
  • Itaú and Corp Group affiliate transactions:
     
    • The “SP settlement”: A settlement in an unspecified amount of unspecified “Claims and controversies among the Debtors, CG Interhold, [Corp Group affiliate] [Inversiones] Gasa [Limitada] and other Released Parties.” Based on the plan’s description of the litigation trust, these claims and controversies are related to the claims and causes of action against Corp Group and Itaú affiliates asserted in the official committee of unsecured creditors’ Thursday, Dec. 23, standing motion. The plan’s definition of “Settlement Consideration” is “consideration in an amount and form agreed between the Debtors and the Settling Parties and determined by the Debtors to be reasonable consideration for the SP Settlement, which amount shall be disclosed in an amended Plan to be filed prior to the Disclosure Statement Objection Deadline.” The plan further provides that “[i]f” the SP settlement is implemented, the settlement consideration would be transferred to the debtors on the effective date by one or more of the settling parties.
       
    • CG Interhold restructuring: On or before the effective date, Corp Group Interhold SpA, or CG Interhold, the parent company of debtor CGB, would restructure its financial obligations to Itaú Unibanco SA and its affiliates through, as elected by CG Interhold in its sole discretion, a consensual out-of-court restructuring of the funded debt of CG Interhold or a prepackaged Chilean reorganization plan. Itaú’s sole recovery in the CG Interhold restructuring would be “CG Interhold Acknowledgements of Debt.” A term sheet attached to the plan contemplates that the acknowledgement of debt would take the form of a debt instrument with a 1% interest rate and 15-year bullet maturity. The amount of debt is an empty placeholder.
       
    • Colombia transactions: If not consummated prior to confirmation, the debtors, Itaú, CG Interhold, Itaú Corpbanca and all other parties to the Colombia agreements would use reasonable best efforts to consummate the “Colombia transactions,” pursuant to which Itaú Corpbanca would purchase the debtors’ and CG Interhold’s minority interests in Itaú Corpbanca Colombia, or ICB Colombia, “for an amount sufficient to discharge” the approximately $416.5 million of obligations under the ICB Colombia credit agreement “in full.” The debtors’ Colombia transactions motion seeks authority to sell their shares (equal to 1.99% of shares outstanding) of ICB Colombia through a private sale to Itaú CorpBanca, or ICB, and pay the proceeds to Itaú Unibanco in full satisfaction and discharge of all the debtors’ obligations arising under or related to the ICB Colombia credit agreement. In connection with the transaction, the debtors intend to dismiss the chapter 11 case for debtor CG Colombia immediately prior to the sale of its shares (comprising 8.28% of outstanding shares) of ICB Colombia to ICB. Nondebtor CG Interhold would also sell its 2.09% interest in ICB Colombia as part of the transaction. The Colombia transactions motion states that if all regulatory approvals have been received, the parties are obligated to consummate the transaction on Jan. 28, 2022.
       
    • FIP Corp Life intercompany payable: On or before the effective date, Fondo de Inversion Privado Corp Life, or FIP Corp Life, would be dissolved under Chilean law, and FIP Corp Life would automatically assign to CG Interhold the intercompany payable owed by CG Interhold to FIP Corp Life with a face amount of approximately $61 million as of Oct. 31, 2021.
       
  • Litigation trust: A post-effective-date litigation trust would be established for the purpose of receiving causes of action “substantially identical to the Causes of Action set forth in counts IV, V, VI, VII, XII, XIII, XIV, XV on Exhibit C to” the UCC’s standing motion, which consist of fraudulent conveyance and breach of corporate duties claims against Corp Group and Itaú affiliates and directors and officers. Litigation trust causes of action would exclude “(i) all Challenges and (ii) all Causes of Action against Released Parties” if an “SP settlement” is consummated.

The debtors’ unencumbered shares sale motion seeks authorization to sell unencumbered shares of Itaú Corpbanca owned by CBG that have an aggregate market value of $7.5 million in order to fund ongoing operating and case administration expenses. The debtors say that the sale arises out of necessity - the debtors’ $13 million in cash on hand as of the petition date will not be sufficient to pay all case costs prior to the effective date of a plan. The proposed sale should generate sufficient cash to cover the cases through April 2022 (including to pay professional fees), the motion says, adding that through the proposed plan and confirmation order, the debtors would seek authorization to sell additional shares if needed. The sale would be marketed by BTG Pactual Chile as broker in at-the-market transactions or in block sales. The motion is accompanied by a supporting declaration from Ari Lefkovits of Lazard which describes the assumptions behind the debtors’ proposal and notes that the unencumbered shares had an aggregate market value of approximately $65.2 million as of Monday, Dec. 27.

According to the DS, upon effectiveness of the plan, the debtors would take the following actions:
 
  • Distributions to Itaú:
     
    • On account of the Class 4 Itaú Chile secured claims, Itaú would receive all Itaú Corpbanca shares pledged by the debtors to Itaú to secure all obligations arising under the Itaú Chile credit agreement.
       
    • On account of the Class 5 Itaú Colombia secured claims, Itaú would recover from the Colombia transactions detailed above.
       
    • On account of the Class 6 Saga Itaú unsecured claims, the CG Interhold restructuring detailed above would be “in lieu of” a distribution to Itaú.
       
    • On account of the Class 7A CGB Itaú deficiency claim, Itaú would receive its pro rata share - based on the unsecured claims pool including Class 7B CGB unsecured noteholders and the Class 7C claim - of (i) the unpledged Itaú Corpbanca Shares owned by CGB (less any such shares sold to fund distributions and administrative expenses under the plan), (ii) residual wind-down cash, (iii) the as-yet-undefined SP settlement consideration, shared pro rata with the Class 7B CGB unsecured notes, and (iv) distributions from the litigation trust - provided that Itaú will not receive any distributions on account of causes of action, “if any,” against Itaú.
       
    • On account of the Class 7C CGB Interhold Intercompany Payable claim, the debtors would distribute to CG Interhold its pro rata share - based on the unsecured claims pool defined above - of (i) the CGB Unencumbered Shares and (ii) the Residual Wind Down Cash, “each of which CG Interhold will immediately upon receipt of such distribution pay and transfer such distribution to Itaú in partial satisfaction of CG Interhold’s obligations under the Itaú Chile Credit Agreement.”
       
  • Distributions to CGB unsecured noteholders: Class 7B noteholders would receive their pro rata share of the unsecured claims pool shared with the Class 7A and Class 7C Itaú affiliate claims noted above. The DS estimates noteholder recoveries at approximately 4.12%.
     
  • Distributions on other unsecured claims: Class 8 convenience claims, defined broadly to mean “any” unsecured claim that is not otherwise classified by the plan, would receive 10% recoveries in cash, subject to a $100,000 cap on aggregate cash consideration.
     
The hearing for approval of the disclosure statement is scheduled for Feb. 2, 2022, at 11 a.m. ET, with objections due Jan. 24 at 4 p.m. ET.

The unencumbered shares sale motion and Colombia transactions motion are set for Jan. 18 at 1:30 p.m. ET, with objections due Jan. 11 at 4 p.m. ET. The UCC’s standing motion, which attacks prior Corp Group and Itaú affiliate transactions, is also scheduled for the Jan. 18 hearing.

DS Approval Motion / Confirmation Timeline

The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:
 

Plan / Disclosure Statement

Below is a chart of the plan’s classes, along with their impairment status, voting rights and estimated recoveries:
 
(Click HERE to enlarge.)

Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:
 
  • Class 1 - Other secured claims: Class 1 claims would be allowed “in an amount equal to the market value, as of the Effective Date, of the collateral securing such … Claim.” Holders would be paid in cash in full or receive the collateral securing their respective claims, sufficient to be rendered unimpaired by the plan.
     
  • Class 2 - Other priority claims: Holders would receive treatment sufficient to be rendered unimpaired.
     
  • Class 3 - Nonrecourse secured claims: Class 3 claims would be allowed “in an amount equal to the market value, as of the Effective Date, of the collateral securing such … Claim.”
     
    • Each holder would receive, at its option, either (i) the collateral securing its Class 3 claim or (ii) its pro rata share, “based on the aggregate claims of Holders electing this option,” of the “NRSCL Equity Interests” - equity interests in a “Non-Recourse Secured Claim LiquidationCo” holding the collateral of equity-electing Class 3 claimholders.
       
  • Class 4 - Itaú Chile secured claims: Itaú’s claims under the Itaú Chile credit agreement and related obligations, estimated at $845 million subject to adjustment for unliquidated amounts, would be allowed in Class 4 in an amount equal to “the 30-Day VWAP, as of the Confirmation Hearing, of the Itaú Corpbanca Shares securing the Itaú Chile Obligations and the fair market value of any other tangible or intangible property or rights securing the Itaú Chile Obligations.”
     
    • The plan explicitly states that allowed Class 4 claims would not be subject to “any avoidance, reduction, setoff, recoupment, recharacterization, subordination (equitable, contractual, or otherwise), counterclaim, defense, disallowance, impairment, surcharge under section 506(c) of the Bankruptcy Code, objection, any challenges under applicable law or regulation, or any other claim or defense.”
       
    • Class 4 claims would receive all Itaú Corpbanca shares pledged by the debtors to Itaú to secure the Itaú Chile obligations, “all rights, powers and entitlements attendant thereto that are collateral securing the Itaú Chile Obligations” and “all dividends, distributions or other proceeds of or upon such shares (including preemptive rights, if any) received or receivable by the Debtors from and after the First Petition Date.”
       
  • Class 5 - Itaú Colombia secured claims “(if any)”: Class 5 treatment simply incorporates the “Colombia Transactions” described more fully above, whereby Itaú Corpbanca would purchase the debtors’ and CG Interhold’s minority interests in Itaú Corpbanca Colombia, or ICB Colombia, “for an amount sufficient to discharge” the approximately $416.5 million of obligations under the ICB Colombia credit agreement “in full.”
     
  • Class 6 - Saga Itaú unsecured claims: The CG Interhold restructuring described above would, “in lieu of Itaú’s receipt of a distribution on the Effective Date,” satisfy “all Claims arising from or related to” debtor Compañia Inmobiliaria y de Inversiones Saga SpA’s, or Saga’s, obligations as a guarantor of CG Interhold on the Itaú Chile credit agreement.
     
  • Class 7A - CGB Itaú deficiency claim: Class 7A consists of Itaú’s remaining claim against debtor CGB arising from CGB’s Itaú Chile obligations not satisfied by the Class 4 distribution.
     
    • The Class 7A claim would receive its pro rata share - based on the unsecured claims pool including Class 7B CGB unsecured noteholders and the Class 7C claim - of (i) the unpledged Itaú Corpbanca shares owned by CGB (less any such shares sold to fund distributions and administrative expenses under the plan), (ii) residual wind-down cash and (iii) distributions from the litigation trust - provided that Itaú will not receive any distributions on account of causes of action, “if any,” against Itaú.
       
    • The Class 7A claim would also, assuming a SP settlement, share the as-yet-undefined SP settlement consideration pro rata with the Class 7B CGB unsecured notes.
       
  • Class 7B - CGB unsecured notes claims: The Class 7B notes claims would be allowed in an aggregate principal amount equal to $543,687,500, “plus all other unpaid and outstanding obligations including any accrued and unpaid interest thereon (including at any applicable default rate), and all applicable … other amounts arising under the CGB Unsecured Notes Indenture, in each case, as of the First Petition Date.”
     
    • Class 7B claims would receive their pro rata share - based on the Class 7 unsecured claims pool - of the unpledged Itaú Corpbanca shares, wind-down cash, litigation trust distributions and any SP settlement funds detailed in the Class 7A recovery.
       
    • In lieu of CGB unencumbered shares, non-accredited investors would receive their pro rata share of cash proceeds from the sale of unencumbered shares designed to provide an equal recovery with all other Class 7B claims.
       
  • Class 7C - CGB Interhold intercompany payable claim: In exchange for the $72.6 million (plus prepetition accrued interest) Class 7C claim, CG Interhold would receive its pro rata share - based on the Class 7 unsecured claims pool - of the unpledged Itaú Corpbanca Shares owned by CGB and the wind-down cash, “each of which CG Interhold will immediately upon receipt of such distribution pay and transfer such distribution to Itaú in partial satisfaction of CG Interhold’s obligations under the Itaú Chile Credit Agreement.”
     
  • Class 8 - Convenience claims: Holders of convenience claims, defined broadly to mean any unsecured claim that is not otherwise classified by the plan, would receive payment in cash in an amount equal to 10% of such claim, subject to a $100,000 cap on aggregate cash consideration.
     
  • Class 9 - Intercompany claims: Class 9 claims would be “cancelled and released without any distribution” on the effective date “to increase the recoveries of third-party creditors of the Debtors.”
     
  • Class 10 - Existing equity interests in the debtors: Class 10 interests would be canceled “or otherwise rendered economically worthless” and receive no distribution under the plan.

Other Plan Provisions

The plan provides for releases of the debtors, “each current and former Debtor Affiliate,” the wind-down estates, the plan administrator, the “SP Settlement” parties” - CG Interhold, Gasa and their related parties - and a broad swath of related parties. The release provision provides that if the “SP Settlement” is not implemented, then the settling parties and their affiliates and related parties would not constitute released parties. In addition, the plan includes an exculpation provision in favor of the debtors, the wind-down estates, the plan administrator and any other post-effective “distribution agent,” the UCC and its members and a broad swath of related parties.

The liquidation analysis attached as an exhibit to the DS assumes the same asset sale proceeds under the proposed plan of liquidation and chapter 7 scenarios and higher administrative costs under chapter 7, resulting in the following estimated recoveries:
 
 
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