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Documentary Credit World

Documentary Credit World (DCW) - March 2024 Vol. 28 No. 3 section - Updates

Parties Agree on Settlement of “Valid” Vesttoo LC

As the bankruptcy case of Israel-based insurtech company Vesttoo continues to unfold, a settlement agreement between the debtors, the Official Committee of Unsecured Creditors, and reinsurer Hannover Re has reportedly been reached over funds pertaining to a longevity swap transaction.

According to insurance news service Artemis on 18 March 2024, the settlement involves the majority of any funds linked to the transaction reverting to Hannover Re, the cedent, but some amount going into the bankruptcy estate.

Hannover Re had entered into the longevity swap transaction with Vesttoo structure, Vesttoo Bay XXI, Limited Partnership, in December 2022. As described by Artemis: “Vesttoo Bay XXI provided what is being termed a valid letter of credit …, so this is one of the rare cases where Vesttoo had transacted with an [LC] that was not a fraudulent one.”

DCW previously referenced an interim investigative report filed in US Bankruptcy Court contending that the “vast majority” of standby LCs connected to 65 transactions closed by Vesttoo since 2020 were fraudulent (Sep 2023 DCW, p. 5).

In the case of Hannover Re, the LC was issued by Santander for GBP 15 million (USD 18m) and Vesttoo Bay XXI also posted cash with the bank for 110% of the LC value as security.

According to Artemis reporting, the agreement reached proposes that Hannover Re will be able to withdraw GBP 11,380,625 from the LC plus interest, after which the original LC will be cancelled and “Hannover Re will release and discharge the bank (Santander) from any further obligations or liabilities in relation to it.” Any remaining funds will go for bankruptcy expenses and distribution.

Although court approval is required to formalize the settlement, the parties involved have agreed to the arrangement.