2007-04-25 Phoenix Kapitaldienst GmbH

Majority of Phoenix creditors agree on insolvency plan – one creditor objects

The majority of insolvent financial service provider Phoenix’s creditors accepted its insolvency plan on 19 April 2007. The Frankfurt Insolvency Court invited creditors to a meeting to discuss the plan and vote on it. The aim was to have creditors vote on the insolvency plan drafted by insolvency administrator Frank Schmitt, an attorney at the law firm of Schultze & Braun, in consultation over the past several months with the creditor’s committee.

Before drawing up the insolvency plan, the administrator first had to create a database of payments to and from investors’ managed accounts. In order to create this database, 40,000 files had to be processed.

This type of plan is innovative. It describes the method for calculating claims and distributing insolvency assets to creditors. This provision of the insolvency plan allows for the disbursement of 200 million euro in the next few months. Because the insolvency plan only stipulates the calculation method for distributing assets, the insolvency process was normal in all other respects.

Creditors showed great interest in the insolvency plan. Around six hundred investors and fifty investor representatives attended the meeting.

“If the insolvency plan is upheld, payment of assets can begin in the third quarter of 2007”, said Schmitt. The legality of the insolvency plan depends on a number of factors, including whether the objection submitted by one creditor is upheld or not. In the next few weeks, the court will review whether this petition nullifies the legality of the insolvency plan. “The opposition of a single creditor, which could result in appeal proceedings, means payment of funds will be delayed further”, said Schmitt. “But we hope that the plan that has been accepted by the vast majority of creditors can be realized in order to begin payment”, Schmitt continued. The insolvency plan sets the conditions for the distribution of 230 million euro in insolvency assets. Under the plan, an initial EUR 200 million will be distributed. This distribution will result in an insolvency rate of approx. 30%. The German Securities Trading Companies’ Compensation Fund (EdW) will then begin compensating investors. The EdW will pay up to 90% of the difference between the claim amount determined by the EdW and the amount from the available assets allotted to each creditor, up to a maximum of 20,000 euro per investor entitled to compensation. “More than anyone else, it will be small investors who get back the bulk of their investment”, Schmitt continued.

Insolvency proceedings regarding the assets of Phoenix Kapitaldienst GmbH were opened on 1 July 2005 in the Frankfurt Insolvency Court. The company offered investors the option of acting jointly with all other investors in derivatives (options and futures). The company misled investors as to the high profits that could be earned in derivative trading.In reality, these managed accounts actually incurred huge losses from the beginning. Since 1998, only a small share of investor money was invested in derivatives. Investor money was used to build up assets at credit institutions, with more than half of the money spent on ongoing business operations, including payments to external distributors and tax payments. High returns were feigned for years, supported by manipulated account statements from a London brokerage firm. This manipulation was first uncovered in 2005 and led to an insolvency filing regarding the assets of Phoenix
Kapitaldienst GmbH.

What are insolvency plan proceedings?

The plan proceedings were introduced into the insolvency statute at the beginning of 1999 and represent an alternative to ordinary insolvency proceedings. The insolvency administrator and the debtor are entitled to request the opening of insolvency plan proceedings. The agreed upon insolvency plan is presented to the insolvency court, which ensures that it is in compliance with certain formal requirements and that it does not have any serious deficiencies. After this preliminary review the insolvency court must arrange a meeting to provide creditors with the opportunity to discuss the details of the insolvency plan and decide whether to accept or reject it. Plan proceedings can be settled within several months of the insolvency petition, while normal insolvency proceedings can last years.

For further information please contact our spokesperson:
Mail: Presse@schubra.de, Phone: +49 (0) 7841/708-0

Additional information:
  • 2011-02-16 BGH ruling: No right of separation for Phoenix investors
  • 2006-02-09 Insolvency plan procedure aimed for
  • 2005-05-04 Assets worth approx. 210 million Euros secured
  • 2005-03-16 Involuntary insolvency proceedings opened - 30,000 investors affected
Schultze & Braun Rechtsanwaltsgesellschaft für Insolvenzverwaltung mbH
http://www.schubra.de, Email: mail@schubra.de