SC developer proposes repaying creditors less than 5 cents for every dollar owed
12/23/2013 8:28 PM
12/24/2013 10:06 PM
Columbia developer Alan Kahn proposes to repay his unsecured creditors less than 5 cents on the dollar on more than $55 million that he says he owes, a reorganization plan filed in U.S. Bankruptcy Court shows.
If the court accepts that plan, it would leave the 73-year-old Kahn poised to retire in two years with many of his personal assets still in place, including a $1.8 million retirement plan, a Paris apartment, and mortgaged houses and undeveloped property in Columbia and on the Isle of Palms.
The two houses, French apartment and S.C. properties are personal assets all listed as owned by Kahn’s wife and would be shielded from the reach of his creditors under the Chapter 11 bankruptcy plan filed by Kahn and his attorneys.
But Gibraltar BB4 LLC, Kahn’s largest creditor in the bankruptcy case, says it will oppose Kahn’s plan.
“I don’t know that we are able yet to determine if this is the full package of assets that would be available” to creditors, said Julio “Ricky” Mendoza, Gibraltar’s lead attorney in the bankruptcy case. “My client feels that there are other assets that should be considered as part of it. I am fairly certain that my client will not agree to the plan as it is currently drafted.”
Kahn, developer of the Village at Sandhill shopping complex in Northeast Richland, filed April 21 in Columbia for Chapter 11 bankruptcy protection. The shopping complex is not part of the bankruptcy filing.
Kahn sought bankruptcy protection for himself and two companies the he controls – Kahn Family LLC and Kahn Properties South LLC – saying the Great Recession took a huge economic toll on his holdings and businesses.
Gibraltar BB4, which specializes in distressed real estate and investments, is owned by Toll Brothers, a publicly traded, home-building giant based in Pennsylvania. It is owed $32 million by Kahn, both sides agree. Gibraltar purchased debts that Kahn owed to BB&T Bank for projects outside South Carolina.
Gibraltar filed a Dec. 20 motion to have a trustee appointed in the case to take charge of whatever assets Kahn has that are not exempt from the bankruptcy filing, Mendoza said. The trustee also should review and determine, among other things, whether other Kahn properties should be part of the bankruptcy estate, Mendoza said, and if so, to pursue them.
Kahn and his Columbia attorney, R. Geoffrey Levy, both said they would “vigorously” oppose appointment of a trustee to the case, saying Kahn has made a good-faith effort to repay his creditors, and citing Kahn’s right under Chapter 11 bankruptcy law to retain possession and control of his enterprises.
“We don’t think that the motion (to appoint a trustee) has merit, and we will oppose it – vigorously,” Levy said, noting Gibraltar is the only Kahn creditor to ask for a trustee.
The Kahn camp says Gibraltar sought to push aside other creditors during private negotiations aimed at restructuring Kahn’s debts in an effort to jump ahead and recover its debt, forcing the bankruptcy filing.
The Bankruptcy Court will hear Gibraltar’s motion to appoint a trustee on Feb. 28.
“For more than the last two years, I have been working honorably and cooperatively with my creditors to maximize their recoveries and to do my best to insure that they are dealt with fairly and equitably,” Kahn said Tuesday. “I will continue to do so.”
In court filings, Gibraltar complains Kahn has used assets from his businesses to finance and keep up his personal properties, including those owned by his wife, while shielding those assets from the bankruptcy proceedings, which are designed to repay his creditors.
The Gibraltar court papers say Kahn continues to put money into his retirement account, for instance, which Kahn’s attorney said is shielded by state law from creditors, even though Kahn is past the age where the law requires him to draw down funds from his retirement account.
“The debtor has owned various interests in properties and in companies over the course of his life,” the Gibraltar motion for a trustee states. “He has enjoyed significant wealth. Despite the circumstances leading to his bankruptcy filing, the debtor continues to live an enviable lifestyle, and he would like to preserve his lifestyle and protect assets for himself and/or his family members.”
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