Bermuda Supreme Court sanctions Vesttoo settlement agreements and plan

After a hearing held on Friday in the Supreme Court of Bermuda, an order has been filed that sanctions the settlement agreements that had been proposed under the Vesttoo Chapter 11 bankruptcy and approval was given for the joint provisional liquidators (JPL’s) to Aon’s White Rock to remove their objections to the plan.

We reported last week that the Bermuda Supreme Court was set to hold a hearing related to the Vesttoo bankruptcy settlement term sheet and plan.

The court needed to approve parties to move forward with the settlement agreements that had been put in place, because issues related to property ownership of segregated cells and constructive trust are important to the plan and for those settlements to be followed through on, due to the structures used for Vesttoo reinsurance transaction being domiciled in Bermuda.

As well as sanctioning the settlements to be actioned on, the Bermuda court also needed to approve the joint provisional liquidators (JPL’s) to remove their objections to the bankruptcy plan, so that it can proceed.

The Supreme Court of Bermuda filed an order that now sets the stage for the bankruptcy plan to be actioned, sanctioning the settlements with cedents and giving its approval for the JPL’s to withdraw their objections to the plan.

Which means parties can proceed with the actions necessary to effect each settlement and wind down those cell structures, while also putting the agreed funds into the pot for the broader liquidation and distribution of the remaining assets of Vesttoo.

The Bermuda court order means the JPL’s can now officially consent to the bankruptcy plan, while also being authorised to implement the settlements.

The order covers the settlements with Clear Blue, Chaucer, Beazley and Porch.

It does not mention the new settlement agreement that emerged last week related to a Hannover Re longevity swap.

The Bermuda Supreme Court order states that the JPL’s can unconditionally withdraw, in accordance with the various settlements, their previous objections to the Vesttoo Chapter 11 plan of bankruptcy and can now consent to confirmation of that plan.

The settlement between the Official Committee of Unsecured Creditors to the Vesttoo bankruptcy and the JPL’s is now sanctioned by the Bermuda court and the JPL’s are authorised to implement it.

So, the JPL’s are authorised to consent to the cedent settlements “in their entirety” and are authorised to agree to the specific provisions of the Chaucer settlement, which differed somewhat to the others and required the JPL’s to waive any claims against a specific White Rock SAC cell and all claims related to one of the Vesttoo Bay debtor vehicles.

The order also includes some details on costs being paid, but with the court filings related to the order sealed, information is lacking on this aspect of the agreement.

But, the important aspects are that the settlements can now proceed and so the claims cedents had will be waived and some recoveries of value now be made, allowing for the rest of the Vesttoo bankruptcy plan and liquidation to proceed as well.

Whether there is much value left for other claimants remains to be seen, given the significant legal and administrative costs involved in this whole saga.

Of course, the settlements do not preclude parties from going down the litigation route with other parties either and litigation continues, such as with the Clear Blue and Aon case.

It will be interesting to see whether more litigation ensues as this first hurdle, of recovering value from segregated cells for the cedents behind those collateralized reinsurance transactions, now appears overcome.

It will also be interesting to see whether any criminal case(s) ensues, once the bankruptcy is finalised, as that seems to be the one thing lacking from the Vesttoo saga at this stage.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.