An examiner appointed to investigate the trading activities of Silver Point Capital in the bankruptcy case of FiberMark cleared the hedge fund of trading improprieties and instead pointed a finger at two investors that made the allegations against Silver Point. Harvey Miller, a court appointed examiner, said American International Group and Post Advisory Group breached their fiduciary duties and used the creditors' committee to further their own self interests in a dispute over the use of private information.
In his report, which was unsealed Aug. 19, Miller recommended the two firms pay $8.4 million to unsecured creditors other than the three largest noteholders. This amount represents how much unsecured creditors have lost in recovery through the delay of FiberMark's reorganization as a result of the battle between AIG, Post and Silver Point. Both AIG and Post dispute the accuracy of the report and stress that it only makes recommendations and has not been accepted by the bankruptcy court.
The examiner's findings will now be considered by the U.S. Bankruptcy Court, District of Vermont. A FiberMark spokeswoman noted that the court may choose not to implement Miller's recommendations and AIG, Post and Silver Point may settle before the court acts on the report's findings. Spokesmen for AIG and Post declined to comment on how they would proceed.
The battle between the three heavyweights centers largely on public/private trading issues. Silver Point became the largest creditor of FiberMark when it filed for bankruptcy in March 2004 and requested that it be allowed to continue to trade FiberMark notes and claims, while also becoming a member of the creditors committee. AIG and Post accused Silver Point of misusing private information it received as a member of the creditors committee.
But Miller, who was ushered into the fray by Judge Colleen Brown, found Silver Point committed no trading improprieties. Instead, he found fault with AIG and Post. "AIG breached its fiduciary duties by using the committee as a tool to accomplish its own agenda and seek benefits for itself, particularly in connection with the corporate governance issues and pursuit of trading allegations against Silver Point," said Miller in the report. "Post, in a similar fashion to AIG, acted in its own self interest in pursuing the imposition of corporate governance provisions on Silver Point and trading allegations against Silver Point, without the consideration of the interests of all general unsecured creditors."
An AIG spokesman disagreed. "American International Group and AIG Global Investment Corp. and other third parties dispute the accuracy of the contents of the report," he said. A spokesman for Post, responding through email, also hit back at the report's findings. "Post has always fulfilled its fiduciary duties to its clients and to its fellow FiberMark unsecured creditors. We strongly disagree with the findings of the examiner's report. The report's conclusions are simply not consistent with the facts presented. We remain committed to finding the best resolution for all interested parties."
A Silver Point spokesman said the company was satisfied with the report's findings and that Fibermark now can move swiftly toward exiting Chapter 11.