Former bank holding company AmFin Financial Corp. has concluded its Chapter 11 proceedings, although it will eventually wind down out of court.

AmFin's reorganization plan took effect on Wednesday, according to debtor counsel G. Christopher Meyer of Squire, Sanders & Dempsey LLP.

Judge Pat Morgenstern-Clarren of the U.S. Bankruptcy Court for the Northern District of Ohio in Cleveland confirmed the plan at an Oct. 25 hearing, Meyer previously told The Deal Pipeline. The order confirming the plan was entered on Nov. 3.

AmFin ultimately plans to dispose of its remaining assets and distribute the proceeds to creditors.

Under the plan for the company, once known as AmTrust Financial Corp., administrative, professional fee and priority tax claims will be paid in full.

Holders of secured claims related to bonds issued by the Cleveland-Cuyahoga County Port Authority also will be paid in full, from proceeds of the $8.15 million sale of a parking garage. The bonds financed construction of the garage.

Convenience creditors — those holding unsecured claims of $25,000 or less — will be paid in full in cash.

Through a settlement with noteholders, outlined in the plan, AmFin will allow senior note claims totaling $100.76 million on an unsecured basis, meaning the related liens, security interests, mortgages and guaranties will be disregarded.

In addition, the first $2 million that would be distributed to the noteholders will instead go to other unsecured creditors, including bondholders. Subordinated noteholders, owed $53.63 million, will not share in the funds.

In exchange, AmFin will not pursue an avoidance action to recover $11.8 million paid to senior noteholders in October 2009. Senior noteholders will also designate a director of the reorganized debtor, who would resign when the claims were paid in full.

According to court documents, AmFin classified the roughly $100 million in noteholder debt as unsecured because noteholders obtained the security interests within 90 days of the Nov. 30, 2009, petition date.

The Federal Deposit Insurance Corp., which has asserted a $550 million unsecured claim, would receive any remaining available cash if its claim were allowed. The FDIC maintains the debtor committed in 2008 to maintain the capital of its AmTrust Bank unit. On Dec. 4, 2009, the Office of Thrift Supervision closed AmTrust Bank, naming the FDIC as receiver. The FDIC sold substantially all of AmTrust's assets to New York Community Bancorp Inc.

A U.S. District Court, however, ruled June 6 that the agency has no capital maintenance claim. The FDIC has appealed the ruling to the U.S. Court of Appeals for the 6th Circuit.

If the FDIC's claim were not allowed, unsecured holders of the port authority bonds, owed an estimated $4.7 million, would split pro rata available cash with other unsecured creditors, including the senior noteholders and subordinated noteholders. AmFin estimated about $20 million in unsecured claims aside from the bond and note debt.

Litigation with the FDIC will have to conclude before any substantial distributions can be made, Meyer said.

Senior noteholders will receive any distribution that would ordinarily go to subordinated bondholders because of subordination provisions.

Equity holders will maintain their stakes. AmFin retains real estate investments, the most significant of which are residential and commercial development projects in Florida, Meyer said.

The investments need to be sold and converted to money, he said, which could take up to six years.

AmTrust Financial filed for Chapter 11 protection on Nov. 30, 2009, with affiliates AmTrust Real Estate Investments Inc., AmTrust Insurance Agency Inc., AmTrust Investments Inc., AmTrust Properties Inc. and AmTrust Management Inc. The company was hurt by its poorly performing investments in residential mortgages and construction loans for land development.

Judge Howard M. Metzenbaum of the Cleveland court on Dec. 3, 2009, approved joint administration of the cases.

The Cleveland company funded its operations during its bankruptcy case through the use of cash collateral.

Meyer, Christine Pierpont, Sherri Dahl, Stephen Lerner and Richard Gurbst from Squire Sanders are debtor counsel. Thomas Coffey, Scott Kelly, Peter Morrison and Glenn Morrical from Tucker Ellis & West LLP are special counsel.

Ronald Glass of GlassRatner Advisory & Capital Group LLC is chief restructuring officer.

Daniel DeMarco of Hahn Loeser & Parks LLP represents AmTrust's official committee of unsecured creditors. J.H. Cohn LLP is financial adviser to the committee.