Bondholders’ Battle: Lawyers of bondholders in bankrupt American Continental, meanwhile, are fighting a proposed $21-million settlement between federal regulators and the creditors committee that is supposed to represent unsecured creditors in U.S. Bankruptcy Court.
Under an outline of the tentative agreement reached last month, the Resolution Trust Corp. would use Lincoln funds to give the committee $21 million, with little more than half earmarked for the mostly elderly bondholders who purchased nearly $200 million in now-worthless bonds at Lincoln’s 29 Southern California branches.
But the hook is that RTC would receive 35% of any recovery the bondholders win against the lawyers and accountants who advised Keating. Those professionals also are named as defendants in the litigation.
It doesn’t take a math wizard to figure out that any judgments or settlements totaling more than $60 million would mean that bondholders would be giving the RTC more than they got from the agency.
“It is incredible, if not impossible, to believe that anyone acting in the best interest of the bondholders could support such a proposal,” their lawyers argued in papers filed in federal court in Phoenix.