Archdiocese of New Orleans bankruptcy deal gets some support

The bankruptcy of the Archdiocese of New Orleans may have taken a major step toward resolution Monday when attorneys representing more than 200 abuse victims shifted their stance to supporting the proposed deal, although those representing bondholders still oppose the deal.

The 10 attorneys indicated they now approve a proposed settlement in which the archdiocese would pay $230 million to a trust for the sexual abuse survivors. The attorneys had opposed earlier offers.

The proposed settlement has the support of a committee representing all 650 abuse survivors and three of four of the church insurance companies.

The settlement will allow abuse survivors to sue the fourth insurance company, Travelers Insurance, if they choose. Travelers didn't immediately provide a comment.

The other insurers are expected to kick in $29 million though it wasn't immediately clear how that money will be distributed.

The archdiocese has about $38 million in municipal bond debt outstanding that are part of the Chapter 11 bankruptcy. The bankruptcy bond trustee, Argent Institutional Trust, told bondholders last week it planned to fight the proposed settlement's offer of 11 cents on the dollar.

An attorney representing the bond trustee declined to comment on the latest developments.

"I remain very hopeful and committed to bringing this bankruptcy to a conclusion that benefits the survivors of abuse," said New Orleans Archbishop Gregory Aymond.

Two-thirds of the victims must vote in favor of the settlement for it to be adopted, with the deadline for all creditor votes being Oct. 29. It is possible for the judge to approve the settlement despite certain classes voting against it. Judges are less likely to approve a plan with multiple classes voting against it, but sometimes it happens.

The judge could reject the proposed settlement as contrary to law and the bond trustee said last week it plans to argue the settlement must be changed.

The bankruptcy is being heard in the U.S. Bankruptcy Court for the Eastern District of Louisiana.