Not long ago, a Pennsylvania bankruptcy judge approved a $30 million settlement between bottling company Le-Nature’s and CIT and Krones AG. CIT and Krones alleged they were drawn into the equipment-financing portion of the $668 million accounting scam that pushed Le-Nature’s beverage bottling company into bankruptcy.
Under the deal, $30 million will be put into the bankrupt estate. CIT’s creditor’s claim will be reduced from $132 million to $112 million and any recovery by CIT is delayed until the trustee recovers $55 million.
In approving the settlement, the bankruptcy judge said the agreements are in the best interests of the trust and the creditors of Le-Nature’s and its debtor affiliates, because, among other things:
(i) the settlement agreements end over four years of complex, costly, and protracted litigation between the trust on the one hand, and the Krones parties and CIT, on the other, in which the outcome is uncertain; and
(ii) under the terms of the settlement agreements, the creditors and the trust will benefit from the elimination of the burden and expense of further litigation against the Krones parties and CIT, and from an infusion of funds to the trustee both to continue his litigation of claims against other defendants and to make distributions to creditors.
By way of background, CIT was the lead lessor under a syndicated lease of bottling equipment to Le Nature’s and, in 2005, CIT and a group of co-lessors funded $144.8 million, of which approximately $45 million was funded by CIT.
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