Insurtech Vesttoo Cites Reorganization Effort as It Resists Creditors’ Motion to Allow Liquidation

As it seeks support for a reorganization plan amid bankruptcy proceedings, insurtech Vesttoo Ltd. is resisting a motion by it creditors to put it into liquidation.

Source: AM Best | Published on October 24, 2023

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As it seeks support for a reorganization plan amid bankruptcy proceedings, insurtech Vesttoo Ltd. is resisting a motion by it creditors to put it into liquidation.

The Official Committee of Unsecured Creditors, a group representing Vesttoo’s creditors, filed a motion in U.S. Bankruptcy Court for the District of Delaware to terminate Vesttoo’s exclusive right to propose a plan of reorganization.

“The committee files this motion to stop the debtors from continuing their wasteful pursuit of a dead-on-arrival reorganization or going concern ‘trade forward’ strategy that has depleted the debtors’ available cash rapidly to a shocking degree,” the creditors said in their motion. “The debtors’ only prepetition business was based on the fraud orchestrated by their former CEO and his accomplices. As a result, the debtors have no ongoing business and have not generated any revenue since filing these cases.”

Under the U.S. Bankruptcy Code, Vesttoo was awarded the exclusive right to file a plan of reorganization for a minimum of 120 days, the company said in an email to BestWire. Vesttoo said it has produced a business plan and received positive feedback from third parties.

“In taking the extraordinary step of seeking to deprive Vesttoo of its statutory rights, the Official Committee of Unsecured Creditors continues to disrupt the company’s ability to restructure and create value for the benefit of all stakeholders,” Vesttoo said. “The committee is ignoring strong indications of interest from within and outside the company in Vesttoo’s proven technology, solid business plan and experienced team.”

Vesttoo said the creditors committee “made clear its desire to immediately liquidate Vesttoo and terminate all of its employees, the majority of whom are currently in Israel under unthinkable conditions and many of whom are currently serving in the conflict in Gaza, and at a time when many employees in the market are in great mourning in light of the murderous terrorist attack, in which hundreds of innocent people were murdered, many of them children.”

The committee “has been clear that it does not support the debtors’ continued pursuit of a going concern business given the mounting losses and little potential upside, if any,” the creditors’ motion said. The motion seeks to have the debtors’ cash resources “preserved for the prosecution of claims against the parties that facilitated, aided and abetted, failed to prevent, or participated in the fraud that caused devastating harm to cedents and other unsecured creditors.”

“Any plan premised on continued investment in the business, therefore, is doomed to fail at significant and prejudicial cost to the estates and their creditors,” the motion said. “Permitting the debtors to retain the exclusive right to propose a plan serves no beneficial purpose for unsecured creditors. The excessive spending of the debtors on developing a new business plan will inevitably result in the exhaustion of the debtors’ cash to the extreme detriment of creditors.”

According to the motion, terminating exclusivity now will save at least $8.5 million in cash based on the debtors’ current monthly operational cost expenditures..

“The debtors’ exclusivity should be terminated so that the committee can propose a simple liquidating plan and bring an end to the debtors’ unfair, unrestrained and wasteful spending.”

The committee seeks to reduce the exclusive periods for Vesttoo by 36 days. The debtors’ exclusive period to file a plan expires on Dec. 14 or 15,depending on the debtor, which is 120 days after the petition dates, according to the motion. The committee has set the hearing for this motion for Nov. 8, about 36 days before the expiration of the debtors’ exclusivity.

Vesttoo said “in a short amount of time, and under impossible circumstances the company has managed to produce a significant business plan and received positive indications from third parties for external investment in the aforementioned plan, and also received an independent opinion that indicates a significant value to the company’s technology.”

“Despite the committee’s sensationalist accusations which do nothing but destroy value, we have no doubt that the creditors’ committee is not trying to maximize any value for the creditors, and in fact is performing actions that constitute complete value destruction,” Ami Barlev, Vesttoo’s interim chief executive officer, said in a statement. “The committee has not even attempted to understand the company’s business plan, nor are they willing to provide the company with the limited time needed to deliver a value-maximizing transaction.”

Barlev said Vesttoo expects to shortly seek bankruptcy court approval to proceed with its plan.

Vesttoo said it expects to file a response to the committee’s motion and expects the bankruptcy court to rule in November.

“The committee’s filings do not impact Vesttoo’s management and operation of its business under the direction of its board of directors,” the company said.

Separately, the Delaware bankruptcy court allowed Vesttoo creditors to gather information from broker Aon plc and its White Rock Insurance Ltd. subsidiary.

The creditors committee petitioned the court for discovery seeking documents from Aon and White Rock related to the proceedings.

“Aon and White Rock do not object to the relief sought in the motion, which is to serve discovery requests on Aon and White Rock while reserving all of their rights to object to the substance of the discovery requests, that Aon and White Rock have agreed to accept service of discovery requests (reserving the right to object to the substance of the discovery requests),” the court said in a separate motion.

After considering the creditors’ motion for discovery, the court granted the motion with the provision that the time for Aon and White Rock to respond to the requests will be extended to Oct. 31 subject to a previous order from the Supreme Court of Bermuda appointing joint provisional liquidators for White Rock entities.

Unsecured creditors of Vesttoo had earlier filed a motion to compel Aon and White Rock to produce documents related to the case that would be relevant to third parties.