FAQs

If the Plan is accepted by the noeholders will I get 85% of my money back?

The answer to this is that we are confident that you will, but the precise recovery is not yet certain. We believe it is more likely you will get more than that much back, as opposed to falling short. The "Liquidation Analysis" at the end of the Disclosure Statement shows that if the Plan is not accepted you would probably get much less, even under the best of circumstances. It is included in the Disclosure Statement to assist you in deciding whether to vote to accept the plan.

What is the timeline going forward?

What about voting on the plan?

We cannot tell you how to vote on the plan, and in fact as we write this we cannot say for certain what the plan will say. However, we expect the plan will be designed to carry out the settlement agreement, including total payments to noteholders of about 85% of their money. If you support the plan you should vote for it to make sure it is approved.

What if the plan is not approved?

It is hard to say what would happen at that point. The settlement may fall apart, and that could make it very difficult for the parties to agree on a new plan. Besides that, we really don’t know what could be included in an alternative plan, so it might take a long time to work that out and to resolve all of the litigation. By “long time” we mean several years, and possibly longer. However, if you believe the plan when it is presented is not a good one and you believe there is an alternative plan that would be better, you should vote against the plan.

What will the payments be?

Under the settlement agreement, we believe you can expect an initial payment of about 20% of your money, and a second payment that will bring you up to about 85% of your money.

I heard we were supposed to get 40% of our money?

At one time, Thaxton was considering borrowing some money to make partial payments. Now it has decided to try to pay 20% or so now, and to try to pay the remainder as soon as possible, thus saving the money that borrowing would have cost.

When will Thaxton sell its business?

That is hard to say exactly. Based on the information we have, it should be possible to get a fair price for Thaxton’s business (“Southern Management”) right now. A sale like that could possibly take place in several months’ time, or it might take a bit longer for a buyer to raise the money for the deal. In order for Thaxton to get the best deal, of course, it has to be able to turn down offers if they are not good ones, and for that reason we expect that Thaxton will reserve the right to put off any sale until it is able to get a fair offer.

What if the business does not sell?

That would not be the worst thing in the world. Thaxton is operating profitably and if it was unable to sell this year it might be able to start making periodic payments to noteholders out of its profits. As profitable as it is, it seems that it would eventually be sold for a very good price. We know most noteholders would like to get this over as fast as possible.

What do I have to do to get my money?

That depends. If you are a noteholder and you have not moved, you will not have to do anything.

If you have moved, you may have given us or Thaxton your new address. If not, please do that now by following the instructions on the Address Changes page. However, to make sure the new address is really your correct address, we think Thaxton may contact you and ask for some sort of assurance that you really have moved (otherwise an imposter could file a change of address and get your money). In the same way, when there has been a death of a noteholder, Thaxton will probably have some documentation that it requires, but it will contact people and let them know what it needs.

What about noteholders who sold their claims to ASM?

When people sold their claims, that was a private transaction between the noteholders and the claims purchaser, and we cannot express an opinion on who owns what claim. We are aware of the fact that some noteholders have asserted claims that they still are entitled to some of the settlement money. We are not parties to that dispute and we don’t represent anyone in that dispute. We do not believe that dispute will cause any delay in carrying out the settlement as to other noteholders.

How will the attorneys be paid?

Typically, class action attorneys are paid a “contingency fee” of around 30%. If this were the case, we would be paid right off the top before the noteholders get their money. The creditors’ committee asked us to consider a modified fee, where we are only paid 6% up front, and the next $109 million gets paid to Thaxton noteholders and creditors. That would give noteholders 85% of their money back, and this agreement helps assure them of that result. Then, after that, we would split recovery with noteholders until they have received about 94% of their money. If that happens, the various attorneys for the noteholders would receive fees of about 17%. This fee agreement was attached to the settlement agreement and mailed out by the bankruptcy court, and also described in the notice in the class action. A hearing on the fee award will take place on January 25 in Anderson.

How does the result in this case compare to other bankruptcies?

There are very few bankruptcies that result in such a large recovery – though there are certainly a few. For example, in the HomeGold case in South Carolina – a somewhat similar situation, investors only recovered about 18% of their money.

There are various reasons for such a good recovery. We believe we were able to target our litigation effectively to get good settlements. About two thirds of the probably recovery will come out of the settlements. In achieving the settlements, we were fortunate to have the cooperation of the creditors committee and their lawyers, Moses & Singer out of New York. Many bankruptcy attorneys are content to take big fees and then push for a quick, easy settlement, but Moses and Singer also worked hard and was a big factor in bringing the case to the point where we were able to achieve a good settlement.

It is important to remember that this case is also notable because, whatever his mistakes may have been, Jim Thaxton was not taking a lot of money out of his companies, so even though they went bankrupt they did retain a lot of value.

During the bankruptcy, Thaxton’s widow, Karen Thaxton remained on the board of directors and worked to assist in restructuring and in the litigation. The chief restructuring officer, Bob Dunn of the Finley Group, has also worked very successfully to maintain the value of Thaxton, and to significantly increase the value of Southern Management.

The Thaxton employees are also a factor in what appears to be a successful workout, because their continued service to the company has allowed it to retain and build value even in during the bankruptcy.