Impac Mortgage: Hildene Converts $23.95M Debt Into Equity

Impac Mortgage Holdings, Inc. and eleven affiliated entities filed prepackaged chapter 11 petitions on April 26, 2026, in the U.S. Bankruptcy Court for the District of Delaware. The filing follows a Restructuring Support Agreement executed on April 22, 2026, among the Debtors, plan sponsor Hildene Re SPC, Ltd., and consenting subordinated noteholders Taberna Preferred Funding 1 LTD and Taberna Preferred Funding 2 LTD. Under the proposed plan, Hildene would convert approximately $23.95 million in senior secured claims into 100% of the reorganized company's equity, while existing common stock interests would be cancelled.

The Irvine, California-based company was formed in 1995 as a real estate investment trust and now operates as a mortgage broker with eighteen employees after years of operational contraction following the 2007 subprime crisis and the COVID-19 pandemic. The Debtors secured $5 million in DIP financing from Hildene and intend to seek plan confirmation within 45 days of the petition date. The Debtors hold at least $850 million in federal and $600 million in California net operating loss carryforwards, which they moved to preserve on the petition date.

Debtor(s)	Impac Mortgage Holdings, Inc. (12 jointly administered entities)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	26-10593
Judge	Hon. Craig T. Goldblatt
Petition Date	April 26, 2026
Plan Type	Joint Prepackaged Chapter 11 Plan of Reorganization
Plan Sponsor	Hildene Re SPC, Ltd.
DIP Facility	$5 million term loan from Hildene (includes $2 million bridge note roll-up), 12% interest, 90-day maturity

From Mortgage REIT to Mortgage Broker

The company originated, sold, and serviced residential mortgage loans nationwide before the 2007 subprime real estate crisis. Impac revoked its REIT status and began operating as a C-corporation, then later reduced the business to a smaller mortgage-broker platform.

As of 2020, operations included mortgage lending, long-term mortgage portfolio investments, and servicing. By Q1 2023, the company had wound down wholesale lending and mortgage servicing operations and repositioned itself as a mortgage broker.

GSE Breakdown, Rising Interest Costs, and Liquidity Crises

The COVID-19 pandemic disrupted operations in 2020, temporarily halting loan originations and requiring staff furloughs. Rising interest rates between 2021 and 2023 drove up payments on the floating-rate Junior Subordinated Notes, and the Debtors were unable to hedge against these rate increases.

A 2015 acquisition of CashCall Mortgage resulted in high prepayment speeds that damaged the company's relationship with Fannie Mae. In July 2020, Freddie Mac suspended the Debtors' ability to sell loans directly, forcing the company to use aggregators, compressing margins and slowing loan origination cycles. Separately, protracted litigation regarding a 2009 exchange offer was not adjudicated until early 2023, impairing the Debtors' ability to raise equity or capital and resulting in lost merger and acquisition opportunities.

To address liquidity challenges, the Debtors undertook a series of asset dispositions: $4.2 billion in unpaid principal balance of Freddie Mac mortgage servicing rights sold in 2020; residual interests sold in March 2022 for $37.5 million, reducing assets and liabilities by approximately $1.6 billion each; Ginnie Mae MSRs of approximately $68 million UPB sold in December 2022 for approximately $725,000; and a $3 million payment in January 2023 to terminate a lease with $8.8 million in remaining commitment. The Debtors also managed Convertible Promissory Notes originally totaling $25 million in 2013, reduced to approximately $10 million by end of 2023 and paid off in full in December 2024 using Employee Retention Tax Credit funds.

By 2023, the Debtors had minimal liquidity and were unable to satisfy operating costs. Despite securing a $20 million prepetition loan from Hildene, the facility was fully drawn by July 2025. In January 2026, the Debtors secured a limited $2 million working capital bridge note from Hildene. On April 22, 2026, the Debtors entered into the Restructuring Support Agreement to facilitate the prepackaged chapter 11 filing.

Prepetition Capital Structure and NOL Carryforwards

The Debtors' prepetition capital structure comprised three primary tranches of secured debt and unsecured junior subordinated obligations.

Prepetition Bridge Note. Hildene Re SPC, Ltd. (as successor-by-assignment to Trinity Park Investments, LLC) held $2 million in outstanding principal at 12% per annum interest, maturing the earlier of January 26, 2027 or satisfaction via DIP financing. The bridge note provided short-term working capital while the RSA was negotiated.

Prepetition Loan (Senior Indebtedness). Hildene provided a $20 million facility at SOFR plus 7.5%, compounded quarterly, secured by substantially all assets of the Debtors. As of the petition date, at least $23.95 million was outstanding including accrued interest and fees.

Enterprise Bank & Trust Loans. Approximately $16.4 million outstanding under three amended and restated promissory notes dated April 30, 2023, with a maturity date of April 30, 2026 -- four days after the petition date. Accrued interest is rolled into principal quarterly. These loans are secured by a collateral assignment of three life insurance policies issued by Allianz Life Insurance Company of North America, with an estimated cash surrender value of approximately $15 million, and cash collateral held in restricted pledged accounts. Enterprise may require increased cash collateral based on the difference between the loan balance and the policies' cash surrender value. The pledged accounts also secure an irrevocable standby letter of credit supporting surety bonds issued by Liberty Mutual Insurance Company.

Junior Subordinated Notes. Approximately $76.354 million in interest-only Junior Subordinated Notes issued on May 8, 2009, following the exchange of trust preferred securities. The Debtors originally issued four series of trust preferred securities in 2005, subsequently retired or exchanged between 2008 and 2017, including a 2009 exchange of $51.3 million of trust preferred securities for $62 million in subordinated notes. The notes were subject to a Forbearance Agreement with HCMC III, LLC, amended to terminate on June 1, 2026.

General unsecured claims. Approximately $1 million in total unsecured debt, comprising disputed, unliquidated, or contingent claims from vendors and cost report payables. The Debtors also estimate a legacy repurchase and indemnification liability of approximately $3.06 million relating to historical mortgage lending obligations, though they believe actual exposure is nominal, noting that none of their ten largest historical counterparties currently have outstanding repurchase demands.

Tax assets. The Debtors hold at least $850 million in federal NOL carryforwards and at least $600 million in California NOL carryforwards as of December 31, 2025. To preserve these tax attributes, the Debtors filed an NOL preservation motion on the petition date, and the court entered an interim NOL preservation order on April 27, 2026.

The interim order establishes notice procedures and restrictions on certain transfers of Impac equity and on declarations of worthlessness that could reduce or eliminate the Debtors' ability to use the NOLs. It also provides that transfers violating the procedures are void ab initio, pending a final hearing on the requested relief.

DIP Financing and Hildene Bridge Roll-Up

The Debtors obtained a $5 million senior secured super-priority DIP term loan from Hildene Re SPC, Ltd. The facility includes a $2 million roll-up of the Prepetition Bridge Note obligations on a dollar-for-dollar basis upon entry of the interim order, plus an initial $1.5 million term loan draw. The DIP bears interest at 12% per annum, with a default rate of the non-default rate plus the lesser of 3% or the maximum permitted by law. The facility is non-revolving.

Security comprises comprehensive collateral including accounts, chattel paper, deposit accounts, fixtures, general intangibles, goods, instruments, investment property, and proceeds. Upon entry of the final order, security also extends to net cash proceeds from avoidance actions, subject to the carve-out. The DIP budget is a 13-week cash flow budget certified by the Chief Restructuring Officer. The prepetition lender consented to priming of its prepetition liens.

The DIP matures at the earliest of 90 days post-petition, the plan effective date, an alternative plan filing, conversion to chapter 7, dismissal, or acceleration. Case milestones require that all first day motions, the combined plan and disclosure statement, and the prepack scheduling order be filed no later than the petition date. Events of default include failure to meet milestones and cross-default under the RSA.

Exit Loan Facility. Upon the effective date, the reorganized debtors will enter into an Exit Loan Facility with Hildene. The facility will refinance DIP obligations and provide $5 million in new money at SOFR plus 4% per annum, with a default rate of an additional 3%. The exit loan matures 36 months after the effective date and is secured by a first priority lien on all assets of the reorganized debtors.

Hildene RSA and Plan Treatment

The plan was negotiated under the RSA dated April 22, 2026, among the Debtors, Hildene (as Plan Sponsor and DIP Lender), and Taberna Preferred Funding 1 LTD and Taberna Preferred Funding 2 LTD (as beneficial holders of the Junior Subordinated Notes). The RSA provides milestones requiring entry of final orders within 30 days of the petition date, plan confirmation within 45 days, and plan effective date within 60 days. A breakup fee of 3% of the value of any alternative transaction, plus all reasonable and documented fees and expenses, plus all amounts outstanding under the DIP and senior indebtedness applies. The RSA includes a fiduciary out provision permitting the board to take or refrain from taking action required to comply with applicable law or fiduciary obligations.

The plan classifies claims and interests across eight classes. The Debtors intend to seek confirmation under section 1129(b) because Classes 5 (General Unsecured Claims), 6 (Intercompany Claims), 7 (510(b) Claims), and 8(a) (Interests in Impac) are deemed to reject. Classes 3 (Senior Indebtedness) and 4 (Subordinated Notes) are entitled to vote.

Class	Status	Treatment
Class 2(a) -- Enterprise Claims (~$16.4 million)	Unimpaired	Reinstated with a consensual five-year maturity extension; existing life-insurance and pledged-account collateral remains in place
Class 3 -- Senior Indebtedness Claims (~$23.95 million)	Impaired; voting	Pro rata share of Plan Sponsor Common Stock, representing 100% of reorganized equity
Class 4 -- Subordinated Notes Claims (~$76.354 million)	Impaired; voting	Pro rata share of a Contingent Payment Certificate; projected recovery of 0.33% to 6.55%
Class 5 -- General Unsecured Claims ($222,000-$1.2 million)	Impaired; deemed rejecting	Pro rata share of $300,000 in GUC Consideration; projected recovery of 24.36% to 100%
Class 8(a) -- Existing Impac equity	Impaired; deemed rejecting	Cancelled and extinguished; no recovery

Class 4 holders receive a pro rata share of a Contingent Payment Certificate. The CPC entitles holders to 10% of consolidated positive earnings of Impac and its subsidiaries for the three taxable years following the effective date, reduced dollar-for-dollar by any cash tax liability incurred during that period. The CPC is capped at $5 million and floored at $250,000, with maturity at 120 days following the end of the third taxable year.

Intercompany claims and section 510(b) claims are also impaired and deemed to reject. Intercompany claims will be adjusted, reinstated, or cancelled. Section 510(b) claims and equity interests will be cancelled and extinguished. Interests in debtor subsidiaries (Class 8(b)) are unimpaired and reinstated.

Releases and governance. The plan includes a Debtor/Estate Release and exculpation covering the Debtors, their officers, directors, and court-approved professionals. Third-party releases are opt-in via a Release Opt-In Election Form distributed as part of the solicitation package. Upon the effective date, the existing board and officers will be replaced by a new three-member board nominated by Hildene. The reorganized debtors will continue operations including a secondment agreement with a technology firm to develop mortgage loan origination software.

Key professionals. Dentons US LLP serves as lead debtor counsel, with Pachulski Stang Ziehl & Jones LLP as Delaware co-counsel. Development Specialists, Inc. (DSI) serves as financial advisor. KCC dba Verita Global was retained as claims and balloting agent. Lowenstein Sandler LLP represents the DIP lender, and Armstrong Teasdale LLP represents Enterprise Bank & Trust.

Key Timeline

Frequently Asked Questions

What type of bankruptcy did Impac Mortgage Holdings file?

Impac Mortgage Holdings filed a prepackaged chapter 11 case supported by an RSA executed on April 22, 2026, with plan sponsor Hildene Re SPC, Ltd. The case was filed on April 26, 2026, in the U.S. Bankruptcy Court for the District of Delaware.

Who is the plan sponsor?

Hildene Re SPC, Ltd. is the plan sponsor and DIP lender. Under the plan, Hildene converts approximately $23.95 million in senior secured claims into 100% of the reorganized company's equity and provides a $5 million exit loan facility.

What happens to existing shareholders?

Existing equity interests in Impac Mortgage Holdings (Class 8(a)) are cancelled and extinguished under the plan. Existing shareholders receive no recovery.

What do subordinated noteholders receive?

Holders of approximately $76.354 million in Junior Subordinated Notes receive a Contingent Payment Certificate entitling them to 10% of consolidated positive earnings over three years post-emergence, capped at $5 million and floored at $250,000. Projected recovery ranges from 0.33% to 6.55%.

Who is the claims agent for Impac Mortgage Holdings?

KCC dba Verita Global serves as the claims and balloting agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more bankruptcy case coverage, visit the ElevenFlo bankruptcy blog.