Providers of the legal services that underpin the nation’s largest corporate bankruptcies are facing pushback in a major chapter 11 hub involving their side deals with a claims-trading startup, the Wall Street Journal reported. Judges in the busy U.S. Bankruptcy Court in New York are scrutinizing those deals with the legal servicers, hired as claims agents in chapter 11 cases to carry out the vast amount of administrative work spawned by large corporate restructurings. Four of the top six firms in the field had deals to provide claims data from their bankruptcy cases to Xclaim Inc., a claims-trading platform, according to the startup. The service providers agreed to supply publicly-available chapter 11 claim information to Xclaim in a digital format that can be used by the platform to facilitate trade between bankruptcy creditors and debt buyers. In return for the information, Xclaim paid the claim agents 10% of the commission it received when its users completed a trade on its platform, court papers show. Bankruptcy specialists who have reviewed the agreements say the deals are problematic because when private companies do claims-agent work, they are stepping into the shoes of courtroom clerks who perform the same tasks in smaller chapter 11 cases but are barred from making money off them. New York judges and the U.S. Trustee Program, are scrutinizing the Xclaim agreements. Read more.
https://www.wsj.com/articles/bankruptcy-services-providers-are-question…
Be sure to read in-depth analysis "Claims Agents Are Barred from Making Money on the Side from the Claims Docket" from ABI Editor-at-Large Bill Rochelle's August 23 column. https://www.abi.org/newsroom/daily-wire/claims-agents-are-barred-from-m…
