FTX submits revised reorganization plan: 98% of creditors are expected to approve a compensation of 118% of the recognized debt amount

Written by: Nan Zhi, Odaily Planet Daily

In the early hours of today, FTX Trading Ltd. (also known as FTX.com) and its affiliated debtors submitted the anticipated revised restructuring plan and related disclosure statement, which disclosed the distribution plan for global customers and other creditors. Odaily will interpret the key points of the document and its historical context in this article.

Key Points Interpretation

Creditor Compensation

The document states that 98% of FTX creditors will receive at least 118% of their recognized claims in cash within 60 days after the plan takes effect. This is an improvement from the previously estimated payout rate of 93% - 97% a month ago. These creditors are categorized in the document as a special "convenience type," with the condition that the claim amount is $50,000 or less (For creditors holding claims in an allowed amount of $50,000 or less).

Other creditors will receive 100% of their recognized claims and compensation for the time value of their investments, which the document states is worth billions (Billions in Compensation for the Time Value of Their Investments), with an annual interest rate of up to 9%.

Claims from government creditors will be classified as subordinate compensation to ensure that non-government creditors can receive full interest.

Asset Value

It is reported that FTX expects the total value of assets to be collected and liquidated for distribution to be approximately $14.5 billion to $16.3 billion, a significant portion of which comes from investments or litigation claims held by Alameda or FTX Ventures.

Since FTX filed for Chapter 11 bankruptcy in the Delaware District Court on November 11, 2022, its asset and claim values have undergone significant changes. The initial bid was around November 18, 2022, with claim values only at 6% - 10% of the debt, at that time the transaction amount was about $1 million.

As of the end of March this year, a total of 49 claims worth over $439 million had been traded on the main trading platform Claims Market. Additionally, according to court records from March 20, hedge funds had purchased heavily discounted claims worth over $2.3 billion, with early buyers making substantial profits.

On April 30, sources disclosed that SOL from FTX's bankruptcy assets had completed a second batch sale at around $100. Approximately 1.8 million SOL were sold in an auction transaction, valued at about $232 million. Sources stated that bidding was completed on April 25, with bids for locked SOL ranging from $85 to $110, and claims that bids of $95 and above had been accepted. Furthermore, according to a Bloomberg report citing an informed source, Pantera Capital purchased more locked SOL in a recent auction. Earlier, Sullivan and Cromwell sold SOL originally valued at $1.7 billion for 64 USDT.

Currently, FTX still holds over 40 million SOL in lock-up, and the price fluctuations of SOL continue to have a profound impact on asset value.

IRS Claims

In fact, at the end of April 2023, the Internal Revenue Service (IRS) filed a claim against FTX and its affiliated entities for assets valued at nearly $44 billion, at which point the priority of compensation could even take precedence over other creditors in the bankruptcy case, significantly depressing the value of FTX claims.

However, according to the latest document, the IRS's corresponding claim has been converted into a $200 million cash payment and $685 million in subordinate claims, with a priority lower than all creditors and government entities.

Conclusion

While most creditors can receive compensation exceeding 100% of their claim value, the calculation is based on the token prices at the time of the bankruptcy filing in November 2022, which still results in significant losses.

It is worth noting that this plan is not the final version and is subject to being finalized and approved by the Bankruptcy Court; once approved, most small creditors will receive compensation within two months. Odaily Planet Daily will continue to monitor related developments.