Note 2 - Reorganization

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Reorganization under Chapter 11 of US Bankruptcy Code Disclosure [Text Block]

Note

2.

Reorganization

On

July 20, 2016,

Novation and

three

of its subsidiaries, NMLLC, NovaStar Mortgage Funding Corporation ("NMFC") and

2114

Central LLC, filed voluntary petitions for reorganization under Chapter

11

of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland (the "Bankruptcy Court"). The Company and

one

of its subsidiaries subsequently filed with the Bankruptcy Court, and amended, a plan of reorganization for the resolution of the outstanding claims against and interests pursuant to Section

1121

(a) of the Bankruptcy Code (as amended as supplemented, the “Plan”) and a related disclosure statement. The Bankruptcy Court entered an order on

June 12, 2017,

confirming the Plan (the “Confirmation Order”) solely with respect to the Company, which provided that the effective date of the Plan will occur when all conditions precedent to effectiveness, as set forth in the Plan, have been satisfied or waived. Two of the conditions to the effectiveness of the Plan were (i) the closing of the Company’s acquisition (the “HCS Acquisition”) of all of the capital stock of HCS and (ii) the restructuring of the Company’s then outstanding senior notes. The HCS Acquisition and the note restructuring were completed on

July 27, 2017

and the Company filed a Notice of Occurrence of Effective Date of the Plan with the Bankruptcy Court. Under the Plan, holders of existing equity interests in the Company (i.e., the common stock) retained their interests.

On

September 25, 2017,

the bankruptcy case of

2114

Central, LLC was dismissed by order of the Bankruptcy Court. Thereafter, on

December 22, 2017,

NMLLC filed with the Bankruptcy Court a Chapter

11

plan of reorganization, and on

December 26, 2017

filed a related disclosure statement. The Bankruptcy Court entered an order on

February 16, 2018

approving the disclosure statement, as revised. On

April 11, 2018,

the Bankruptcy Court confirmed NMLLC’s plan of reorganization. This plan allows NMLLC to exit bankruptcy but prohibits the use of NMLLC assets for anything other than for the payment of NMLLC obligations. On

April 19, 2019,

the Bankruptcy Court approved the Motion for Final Decrees for Novation and NMLLC. On

July 16, 2019,

the bankruptcy case of NMFC was dismissed by order of the Bankruptcy Court.

Reorganization and bankruptcy-related expenses for the

twelve

months ended

December 31, 2019

and 

December 31, 2018

were $

0.06

million and $

1.9

million, respectively.