Monthly Archives: September 2013

New Jersey Residential Developer Hovbilt, Inc. Seeks Chapter 11 Relief

By:  Justin A. Saporito, MAZURKRAEMER Law Clerk and Salene Mazur Kraemer, Owner

bank. court of nj seal                Hovbilt, Inc. filed a voluntary petition for bankruptcy relief under Chapter 11 of the bankruptcy code on September 17th, 2013.  The case was filed in the Bankruptcy Court of New Jersey and the case was assigned to the Honorable Judge Michael B. Kaplan under case number 3:13-bk-30341.  For a summary of the docket please click here.

Debtor claims assets between $0 and $50,000 with liabilities of $1 to $10 million.  In its petition, it lists 10 creditors including Home Depot and Sovereign Bank.  (Please see the docket summary for a complete list of creditors.)  Sovereign Bank filed for a Notice of Appearance and Request for Service of Notice by its duly appointed counsel in response to Debtor’s voluntary petition for Chapter 11 relief.  The petition, as filed, was incomplete and the Attorney Disclosure Statement, Statement of Financial Affairs, Summary of Schedules, and Incomplete Filings are due by October 1st, 2013.

This Chapter 11 Debtor’s exclusive right to file a plan of reorganization expires on January 15, 2014.

CHAPTER 11 DEBTOR TIP: Every Chapter 11 Debtor should know that upon the commencement of a chapter 11 case, Bankruptcy Code section 1121 gives a debtor-in-possession (“DIP”) the exclusive right to file a plan of reorganization for 120 days (4 months).  The DIP also has the exclusive right to solicit acceptances (votes) for a plan filed within that 120-day period until 180 days (6 months) after filing for chapter 11.  (A debtor may file a plan but creditors may not actually vote on the plan until an accompanying approved Disclosure Statement and set of ballots are served).  No competing plans may be filed during this period of exclusivity.  A creditor, a creditors’ committee, or another special interest committee may be one of the parties filing a competing plan.   Sometimes various parties join together to file a “jointly proposed” competing plan.  See helpful article regarding exclusivity written by Salene’ brother-in-law’s fine law firm Jones Day.

This Debtor is a property developer specializing in residential housing developments located at 1 Dag Hammarskjold Blvd. Freehold, NJ 07728.  Hovilt, Inc. was established in 1969 as a private company categorized as a speculative building of single-family houses and primarily operated in Monmouth and Ocean Counties in New Jersey. (source)

Debtor is represented by James G. Aaron of Ansell Grimm and Aaron PC located at 1500 Lawrence Avenue CN 7807 Ocean, NJ 07712.

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Chapter 11 Debtors Beware: Do Not Fail to Pay Quarterly Fees Owed to the U.S. Trustee

By:  Justin Saporito, Law Clerk and Salene Mazur Kraemer, Owner

U.S. DOJ seal

What fees are associated with filing a Chapter 11 case? Aside from payment of attorneys’ fees (which can be steep), there are filing fees and ongoing quarterly administrative fees.

For a chapter 11 case, quarterly fees must be paid to the U.S. Trustee each quarter, or fraction thereof, until that case is closed, dismissed, or converted.  These fees are in addition to the filing fee that must be paid by the debtor.  The amount owed by the debtor is based upon the amount of disbursements made during the quarter starting at a minimum of $325 with a maximum of $30,000.  (Complete breakdown of quarterly fees w/ instructions.)   Again we repeat, there is a minimum payment of at least $325 a quarter.   If significant assets are sold, a debtor may be looking at a quarterly fee up to $13,000 or even $30,000 to be made payable to the U.S. Trustee’s office.  The fee schedule is uniform for all Federal Judicial Districts that are a part of the U.S. Trustee Program which includes all Federal Judicial Districts except for Alabama and North Carolina.

Quarterly fee bills are mailed to the debtor by the U.S. Trustee at the end of each quarter with instructions on how to determine the amount of fees owed.  These fees are due on the last day of the calendar month following the calendar quarter.  The minimum fee is due even if no disbursements were made that quarter and failure to pay a quarterly fee is cause for conversion or dismissal of the chapter 11 case.  Failure to receive an invoice does not excuse the obligation to timely pay U.S. Trustee’s fees.  Debtor’s counsel should contact the Office of the U.S. Trustee If a quarterly bill is not received, unless counsel for the debtor has executed an authorization allowing the U.S. Trustee to discuss the issue of quarterly fees with the debtor.

For payments made by check, the payment is converted to an electronic funds transfer (EFT).  This means that the account information will be copied from the check to electronically debit the debtor’s account for the amount of the check.  The debit usually occurs within 24 hours after which the original check is destroyed.  A copy of the check will be made by the U.S. Trustee’s Office however.  If the EFT cannot be process due to technical reasons, the debtor authorizes the U.S. Trustee’s Office to process the copy in place of the original check.  If the EFT cannot be completed due to insufficient funds, two more attempts to make the transfer may be made.

TIPS FOR THE CHAPTER 11 DEBTOR:  Payment of these U.S. Trustees fees is important.  The U.S. Trustee is an agent of the Department of Justice.  He or she is a lawyer who plays a critical and influential role in every Chapter 11 Case (more on this later).  Do not overlook paying these fees or responding to any requests made by a U.S. Trustee.   If a Debtor ignores such requests or fails to pay U.S. Trustee fees, the Debtor can almost be certain that a Motion to Dismiss the Case or Convert the Chapter 11 Case to  Chapter 7 Case (liquidation) will be forthcoming.

Riverview Country Club Files for Chapter 11 Bankruptcy in West Virginia

By:  Justin Saporito, MAZURKRAEMER Law Clerk

Riverview Country Club - Flag              On September 10, 2013, the Riverview Country Club, Inc. filed a Chapter 11 Voluntary Petition in the United States Bankruptcy Court for the Southern District of West Virginia, Case No 2:13-bk-20467 in front of the Honorable Judge Ron Pearson.   Riverview Country Club is a semi-private 18 hole regulation golf course that was built in 1970 and opened in 1972.  Riverview Country Club is located on Route 17 Riverview Course Road in Madison, West Virginia 25130.  The 6,069 yard par 70 course was designed by Bob Plant and is open year round to the public.

The Debtor claims assets valued between 0$ to $50,000 with liabilities of $500,001 to $1 million listing BB&T, Dollar Bank Leasing Corp, Motive Power, Inc. Premier Bank, and USX Transportation as creditors.  The Debtor is represented by Mitchell Lee Klein of Klein Law Office located at 3566 Teays Valley Road Hurricane, WV 25526.  Mr. Klein filed a Corporate Statement Ownership Statement and Corporate Resolution.

Prithvi Catalytic, Inc., an IT Consulting and Engineering Firm, Files Ch. 11 in Pittsburgh

prithvi_logo_10By:  Justin Saporito, Law Clerk

On September 10th, 2013 Prithvi Catalytic, Inc. filed a voluntary petition for relief under Chapter 11 in the United States Bankruptcy Court  for the Western District of Pennsylvania, which was incomplete.  Statements A-J, Statement of Operations, Summary of Schedules, and Tax Information are due by September 24th, 2013 and a Chapter 11 Plan is due by January 8th, 2014.  Debtor claimed assets between $1 million to $10 million with liabilities ranging from $10 million to $50 million.

The Debtor is a multi-national IT Consulting and Engineering solutions company that began operations in 1998 with its registered office in Hyderabad, India and opened its first U.S. office near Seattle, WA in 2000.  The Debtor expanded operations with new development centers and sales offices in the U.S., Canada, Brazil, India, South Africa, and the Middle East.  Debtor focuses its strategic business in the healthcare, retail, BFSI (banking, financial services, and insurance), and telecom markets and provides services in Europe in addition to the regions where it maintains offices.

A total of fifty-four creditors are listed on the Debtor’s petition including  the District of Columbia, various Departments from 22 different U.S. states, the federal government, and several private companies.  Click here for  Complete list of Creditors and summary of docket.

Debtor is represented by Louis P. Vitti of Vitti & Vitti & Associates, PC located at 215 Fourth Avenue Pittsburgh, PA 15222.  The Office of the United States Trustee Liberty Center  shall be represented by Kathleen Robb located at Suite 970 1001 Liberty Avenue Pittsburgh, PA 15222.

Inside the Trenches of a Chapter 11: The Firehose of the First 30 Days

fire-hydrant-flushing    The first 30 days of a Chapter 11 bankruptcy case often are like water spewing violently out of a fire hydrant.  Fast.   Furious.  Urgent.  Many issues being thrown at the Debtor, its employees, and its lawyers at one time.

According to the Pre-Bankruptcy Planning for the Commercial Reorganization: A Brief Guide for the CEO, CFO/COO, General Counsel and Tax Advisor, written by the Reorganization and Restructuring Group of Squire, Sanders & Dempsey, LLP (2nd edition, 2008), a whopping 83 percent of chapter 11 reorganizations that are filed generally “die on the vine” and are never confirmed.

I purchased this Brief Guide at the American Bankruptcy Institute that I attended this past Spring and I thought I would write a few blog posts integrating my experience with the concise content of the book.  As set forth on Appendix A to the Guide, generally certain matters must be addressed within the first 30 days of a case.

  • Petition filed
  • Filing of list of 20 largest creditors
  • Applications for retention of professionals (attorneys, accountants, turnaround professionals, valuation specialists, real estate brokers).  A Debtor cannot pay a professional unless the retention of the firm is first approved by the Judge and the professional files a fee application on the docket, to which parties may review and/or object.
  • Filing of ”first day” motions (seeking authority to pay wages, use pre-petition bank accounts, pay deposits for utilities, use of cash collateral, payment of interim compensation to professionals)
  • Filing of schedules of assets and liabilities and statement of financial affairs.  Getting correct addresses and dollar amounts owed for every single creditor often is a daunting task.  Once the Schedules are filed, a creditor matrix is generated. The Bankruptcy Court and parties in interest use this address list to mail or “serve” important pleadings in the case. If the matrix is enormous, certain limited servicing lists can be authorized by the Court. In mega-cases, servicing agents are employed by the Debtor to handle only this aspect of the case, i.e., proper service.
  • Filing of Corporate Resolution authorizing the Chapter 11 filing
  • Negotiation of debtor in possession financing
  • Hearing on use of cash collateral and adequate protection
  • Negotiation with trade creditors regarding reclamation claims and/or reestablishment of trade terms.

The first few weeks of a case can be exhausting and dramatic.  Often, by the time a petition is filed, a debtor runs out of money and payroll has not been paid (therefore employees are angry and morale is low), bank accounts frozen, the utilities have been shut off, and/or the front doors have been padlocked by a creditor.   Once a case is filed, a creditor may immediately file a motion to dismiss the case.

The filing of the petition and related schedules requires a financial autopsy of a business and all of its related entities. In order to avoid confusion down the road, Debtor’s counsel should try to obtain as much factually accurate information as possible during this time. The process requires persistence, diligence and coordination with the Debtor’s employees, who basically become your co-workers for as long as the case is open, which could be 18 months or longer.

During this critical time, management and key employees must be counseled regarding what to do and not do, now that the actions of the Debtor are under close scrutiny by not only a Judge but also a U.S. Trustee as well as the creditor body. Employees should be clear regarding what transfers may or may not be made without court approval.  Also, at the same time, the U.S. Trustee’s Office dictates that a debtor comply with its financial reporting requirements (hence the required “Monthly Operating Report”), and the filing of insurance and bank account information.  Lack of compliance may lead to a dismissal of the case or a conversion to a Chapter 7.  Often the debtor must close pre-petition bank accounts and open new ones.

Keeping all constituencies informed is an important part of the role of Debtor’s counsel.  Creditors may include key lenders and critical vendors who will want to know what the turnaround strategy is for the company. Once creditors receive the “Notice of Suggestion of Bankruptcy”, they too will be scurrying around to hire bankruptcy lawyers if the size of their claims warrants such an expense.

Stonefront Witch Way Inn Files for Chapter 11

BY: Katie Imler, Law Clerk

On July 26, 2013 , TAM of Allegheny LLC d/b/a Stonefront Witch Way Inn filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Western District of Pennsylvania (assigned No. 13-23143-GLT). The Stone Front Witch Way Inn, located at 2827 California Avenue, Pittsburgh, PA 15212, was a local café and bar that was padlocked by police on June 28, 2013 for not paying the Allegheny County drink taxes totaling more than $22,390. The Allegheny County Treasurer, John Weinstein, has been cracking down on businesses that are not paying the alcoholic beverage tax.

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The case has been assigned to the Honorable Judge Gregory L. Taddonio. Norma Hildenbrand has filed an Notice of Appearance and Request for Notice on behalf of the United States Trustee. A summary of the docket can be found here.

The Debtor listed $50,000-$100,000 in Assets and $0-$50,000 in Liabilities, which are primarily business debts. Although there are less than 50 creditors, the top creditors holding unsecured claims include: Allegheny County ($21,864), BMI ($658.07), Chase Bank ($2,723.39), Dietz Electronics, Inc. ($438.98), IRS ($8,058.44), Joseph J. Brunner, Inc. ($407.80), and Trudy L. Schmitt, President of TAM of Allegheny LLC. All Schedules and Attorney Disclosures are due on August 9, 2013. The Chapter 11 Plan and Disclosure Statements are due November 25, 2013. However, the Government Proof of Claims Bar Date is set for January 22, 2014.

The Debtor is represented by J. Michael Baggett of McCann Garland Ridall & Burke, 11 Stanwix Street, Suite 1030, Pittsburgh PA, 15222. Jodi L. Hause filed a Notice of Appearance on July 29, 2013 to represent Creditor Duquesne Light Company. A Status Conference will be held on October 20, 2013 at 10:00am.