A judge overseeing
The committee, representing the unsecured creditors, presented a number of claims they want to litigate including that RCP's transfers were "fraud and fraudulent inducement" and that the company had undue influence on the decisions AFI made prior to its bankruptcy.
Amerifirst
In the midst of all of this, AFI entered into a restructuring agreement with RCP in May 2023, amending a prior 2021 credit agreement, under which RCP loaned $50 million to AFI.
This restructuring agreement gave RCP first-priority liens on all AFI assets, a conversion of $4 million of debt into preferred equity and "lockbox control over AFI's cash" in return for waiving "any other claims…under the original credit agreement for prepayment fees and accrued interest," the committee claims.
About a week later, RCP started pulling millions of dollars from a shared bank account with AFI, thereby, according to the committee, making the lender violate the liquidity covenant with Fannie Mae and
An attorney representing the committee challenging RCP's actions did not respond to a request for comment. RCP said it does not comment on ongoing matters Monday. Law360 was the first to report on new developments pertaining to the bankruptcy.
On May 25, 2023, RCP withdrew $5 million from a shared bank account with AFI and one month later, the private investment firm took an additional $3.3 million and a $593,000 transfer on August 17, 2023, documents show.
The draining of this account resulted in AFI being unable to restore its selling and servicing rights with the government-sponsored enterprises, the committee representing the unsecured credits claims. It also allegedly contributed to AFI's difficulty in meeting its payroll obligations and paying various vendors for services provided to the defunct later. Soon after, the lender filed for bankruptcy.
The committee argues the May 2023 restructuring created favorable obligations for RCP that "led to additional liens and financial control."
RCP also "falsely represented to AFI its intention to assist the rebooting of AFI's operations," according to the committee. But then, they say, it immediately withdrew money that made the struggling company undercapitalized and ultimately in violation of liquidity covenants with the GSEs.
Unsecured creditors also allege RCP was a "non-statutory insider" that attended Amerifirst's board meetings, had access to confidential board materials and received "highly detailed internal operating reports from AFI that far exceeded typical borrower reporting requirements."
RCP has denied that it was an insider, noting dealings between RCP and AFI were at "arms length."
Thomas Horan, a judge for the U.S. Bankruptcy Court for the District of Delaware, allowed a number of claims from the committee to go forward. Allegations that can proceed include a constructive fraudulent transfer of an insider claim and a claim to recover fraudulent transfers.
"The committee's allegations create questions of fact requiring further inquiry," Judge Horan added.
However, he wrote that the unsecured creditors failed to assert a colorable claim for fraud and fraud inducement.
"The committee accuses RCP of inducing AFI to agree to the May 2023 restructuring by agreeing to behave in a "commercially reasonable manner" and forbear from taking actions that would negatively impact AFI's businesses," Horan wrote. "But the committee fails to justify a reliance on those broad — and unspecified — promises."
