After the collapse of the real estate market in 2008, Residential Capital, the 5th largest mortgage lender in the US was embroiled in years of litigation with borrowers, securitization trusts and mono-line insurers. Unable to resolve these matters out of court, Residential Capital filed for protection under Chapter 11 in May 2012.  On August 23, 2013, following a highly contentious case, the debtor, the Creditor’s Committee and Ally Financial, Rescap’s parent, filed a joint plan of reorganization (the “Plan”).  The Plan, provided for the establishment of a liquidating trust (the “Trust”) as the successor in interest to all of Rescap’s assets and business, was approved by the court in December, 2013.

The Creditor’s Committee selected Quest Turnaround Advisors, LLC to serve as an advisor during the period preceding the Plan’s approval and to serve as the Liquidating Trust Manager after consummation of the Plan.  Jeffrey Brodsky led this engagement on behalf of Quest and worked closely with the Creditors Committee and Management (together with their respective advisors), first organizing the Trust as a standalone entity and then managing the Trust’s business and affairs to achieve the Plan’s objective of maximizing the value of the Trust’s assets.

Shortly before exiting Chapter 11, a subsidiary of Residential Capital filed seventy three separate lawsuits against correspondent lenders for breaches of representations and warranties and for indemnification against losses suffered on account of loans acquired from those lenders by Rescap affiliates.  This litigation presented an opportunity to substantially increase the value of Rescap’s assets far in excess of the approximately $2.5 billion of value contemplated by the Plan.

Upon the conclusion of Quest’s role in December 2015, over $2.2 billion has been distributed to beneficiaries since inception.  Following distribution of $1.7 billion to beneficiaries, units of beneficial interest in the Trust traded as high as $20.00 per unit implying an all in value of $3.7 billion.   This provided an opportunity for creditors to monetize their position at values substantially higher than those projected by the plan.