Opinion
NOT FOR PUBLICATION
ORDER ON OSC RE: CONVERSION
PETER W. BOWIE, Chief Judge United States Bankruptcy Court
This case has a tortured history of groups of investors, fractured by distrust, claims of priority, and the like. A snapshot of the proceedings is set out in the Court's Order on Trustee's Borrowing Motion. In that Order, the Court set for hearing its own Order to Show Cause re: Conversion to Chapter 7.
The Chapter 11 trustee responded to the OSC, setting out that it had received an offer of $10,000,000 for the property, plus a 3 0% stake in the purchaser which, if development of the project was successful, might produce distributions up to $77,000,000. Further, the proposed sale would include an overbid auction, with the initial overbid of $900,000, and with a breakup fee of $500,000 plus actual expenses up to $300,000. The trustee's proposal drew opposition, both in writing and at the hearing.
The investors/creditors of this case hold fractional security interests in first, second, and third priority trust deeds on the subject property. It has been argued without controversion that the first tier interest holders hold claims in excess of $100,000,000. Thus, even under the most optimistic view of the proposal communicated through the trustee, even the first tier interest holders would not be paid in full, and the second and third tier holders would be completely out of the money. They seem to know that, which supports an inference why they have not stepped up to even fund a study of what the property might be worth to see if there is anything in it for them.
The trustee and his professionals have done a most impressive job with little time and no resources. However, the Court has already determined this is a single asset real estate case, and it has been pending over one and one-half years. The case has been through Mr. Pierce as manager, then the Watley Group, and then a Chapter 11 trustee. There does not appear to be a solution in the bankruptcy arena for this property and these parties.
For all the foregoing reasons, including those set out by the Court in its earlier rulings, and despite the valiant efforts of the trustee and his professionals, the Court finds and concludes that this case should be, and hereby is converted to one under Chapter 7.
IT IS SO ORDERED.