The Archdiocese of New Orleans denied bondholder attorneys' accusations of "securities fraud" made after the church said it would miss a July 1 bond interest payment and plans to restructure its bond debt in its bankruptcy.
Colleen Murphy, an attorney for the bond trustee Argent Institutional Trust Co., said at a June 13 bankruptcy hearing the archdiocese had repeatedly told bondholders the interest would be paid on time and the bonds would be paid in full, but now is saying otherwise. "That is the definition of securities fraud."
Her colleague, attorney Christopher Marks, echoed the charge, noting the archdiocese's representatives in the last 10 days have indicated there will be impairments."
Marks said his firm Greenberg Traurig hired securities law experts to look at the issue and "potentially pursue" action. Marks is an associate and Murphy is a shareholder at Greenberg Traurig.
Mark Mintz, a partner at Jones Walker representing the archdiocese, said at the hearing talk of securities fraud is "an extreme stretch." The bond attorneys were "spouting out accusations."
"The Archdiocese of New Orleans strongly disagrees with the inflammatory statements made by the Argent attorneys in court," said in a statement to The Bond Buyer. "The details of the plan are subject to mediation privilege and more information will be made available when the plan is filed on or before July 15, 2025."
Early in the Chapter 11 bankruptcy the archdiocese
The attorneys' arguments followed a posting to the EMMA web site on June 6 and an email indicating the archdiocese's intention to restructure the bonds.
The archdiocese said in the posting it would not be making a nearly $1 million bond interest payment due on July 1, and the archdiocese, unsecured creditors committee, and some other bankruptcy groups plan to file a plan of reorganization by July 15 that would not include "reinstatement of the bonds."
Marks said that on June 12 he received an email saying bondholders would get reduced interest payments, extension of maturity dates, a "further cut" to bond principal and no payment of their attorney fees. "It's a seismic shift in this case," he told U.S. Bankruptcy Judge of the Eastern District of Louisiana Meredith Grabill.
Marks said the archdiocese has failed to respond to his firm's inquiries about the proposed treatment of bondholders.
The archdiocese hasn't told any parties the proposed treatment in any significant way outside of a memo of understanding, according to Mintz, who said there are "feasibility concerns" about the restructuring plan under development.
Murphy said the bonds are held by Louisiana residents, many of them parishioners of the archdiocese, and not just institutions.
Marks said the issue of the archdiocese's solvency will have to be argued in the case.
The archdiocese has been in bankruptcy since 2020 following a series of lawsuits alleging its priests had engaged in child abuse.
According to a June filing of the bond trustee $41.9 million in bonds are outstanding.
According to an archdiocese filing to the EMMA web site, it had a total of $449 million in liabilities as of December 31.
Parties expect the plan of adjustment case to occur in December. Grabill said the bankruptcy cannot go on "indefinitely."
The accusation of securities fraud against the archdiocese was first reported by The Guardian news website.
