Debtor Closes on Post-Petition Loan; Committee Dissolves

As expected, the Debtor closed on its Post-Petition Loan of $2,047,448.31 from Mercer County State Bank on or about 5/31/11.  It is expected that the initial distribution to unsecured creditors in the amount of $30,000.00 will occur shortly.  The terms of the Debtor’s Confirmed Chapter 11 Plan of Reorganization (“Plan”) govern the administration of the Debtor’s Bankruptcy Estate moving forward.

Also pursuant to the Plan, the Official Committee of Unsecured Creditors (“Committee”) is dissolved and employment of Committee Counsel is terminated, with certain limited exceptions.  As a result, this will be the final report made by the Committee pursuant to its obligations under 11 U.S.C. § 1102(b)(3).

As always, if you would like to have complete access to the Bankruptcy Court docket in this case, you can request a PACER I.D. by following the PACER link on this page, which will enable you to access the docket as well as view and print documents filed in the case. 

Court Enters Order Approving Emergency Joint Motion to Increase Amount of Court-Approved Post-Petition Loan

On 5/26/11, the Debtor, together with Official Committee of Unsecured Creditors and Mercer County State Bank ("Mercer Bank"), filed an Emergency Joint Motion to Increase Amount of Court-Approved Post-Petition Loan ("Joint Motion").  The primary purpose of the Joint Motion was to increase to amount being borrowed by the Debtor from Mercer Bank from the previously approved amount of $2,000,000 to $2,047,448.31.  The increase was necessary to cover a shortfall in funds needed to close the Post-Petition Loan, and the Joint Motion was presented on an emergency basis in light of the necessity to close the Post-Petition Loan by 5/31/11.  The rights of all other parties remain unaffected and continue to be governed by the terms of the Debtor's confirmed Chapter 11 Plan and/or otherwise by previous stipulation as filed.

Upon notification by the parties that the Joint Motion had been filed pursuant to the Judge's General Procedures on emergency matters, the Order approving the Joint Motion was also entered on 5/26/11.  The Post-Petition Loan is expected to close on 5/31/11.

Court enters Order confirming Debtor’s Second Amended Chapter 11 Plan of Reorganization

Following the confirmation hearing held on 4/28/11, the Bankruptcy Court entered an Order confirming the Debtor's Second Amended Chapter 11 Plan of Reorganization (“Plan”) filed on 4/26/11.  The Debtor shall pay unsecured creditors as follows:  1) $30,000 on the Effective Date of the Plan (which will be approximately 5/18/11); 2) $105,000 in six (6) semi-annual installments; and 3) the Contingent Payment to General Creditors, if any, as defined in Paragraph 1.17 and described in Exhibit A to the Plan.  The Debtor estimates that payments will result in a pro-rata distribution of approximately ten percent (10%) to unsecured creditors with claims greater than $1,500.00, plus any Contingent Payment.  Creditors with claims less than $1,500.00 will receive fifty percent (50%).  

In addition, the Debtor made certain concessions in its Plan and by way of Stipulations filed with the Court to address the prior Objections filed by various Parties.  A closing on certain material actions necessary to effectuate the Plan is currently scheduled for 5/18/11.

If you would like to have complete access to the Bankruptcy Court docket in this case, you can request a PACER I.D. by following the PACER link on this page, which will enable you to access the docket as well as view and print documents filed in the case.  Please also feel free to contact us at wldcommittee@quinnfirm.com to obtain a copy of the Second Amended Plan, Second Amended Disclosure Statement, and/or any other pleadings as filed.

Court Enters Order Directing Debtor to File Second Amended Plan and Disclosure Statement

On 4/1/11 the Bankruptcy Court entered an Order dismissing the Debtor’s Amended Chapter 11 Plan of Reorganization (“Amended Plan”).  On or before 4/26/11, the Debtor shall file and serve a Second Amended Plan and Disclosure Statement primarily to address those Objections raised with respect to the Amended Plan.  No further balloting will be necessary unless there are detrimental proposed changes as to any class of creditors.  A hearing on the confirmation of the Second Amended Plan and Disclosure Statement has been scheduled for 4/28/11 at 10:00 a.m. in the Erie Bankruptcy Courtroom, United States Courthouse, 17 South Park Row, Erie, Pennsylvania 16501.  The Court also entered Orders continuing generally all Objections until that date and time.

In addition, on 4/5/11 the Court entered an Order Authorizing Use of Cash Collateral pursuant to Mercer County State Bank’s (the “Bank”) agreement with the Debtor to extend the deadline upon which its commitment to refinance the Debtor expires until 5/18/11.  The Court also entered an Order continuing generally the hearing on the Debtor’s Motion for Authority to Incur Secured Debt, to Enter into Financing Agreement with the Bank, and to Grant First Priority Liens pursuant to Bankruptcy Code Section 364(C) until 4/28/11.

Mercer County State Bank, Developers Surety and Indemnity Co., Allegheny Mineral Corp. Among Creditors Filing Objections to Debtor’s Amended Plan

As posted previously, the Debtor on 2/17/11 filed an Amended Chapter 11 Plan of Reorganization (“Amended Plan”) and Amended Disclosure Statement.  On 3/28/11, Mercer County State Bank (the “Bank”) filed an Objection to the Amended Plan alleging that there will be insufficient cash flow to support the debt service on the proposed $2 million plan financing.  In addition and among other grounds, the Bank also objected to the extent that there does not appear to be sufficient funds available at closing to satisfy all existing lien holders on the collateral being pledged to the Bank.  

Also on 3/28/11, Developers Surety and Indemnity Company also filed an Objection to the Amended Plan to the extent that it is an impaired creditor since it must subordinate its status as a judgment creditor to the Bank.  In addition, Allegheny Mineral Corporation filed an Objection to the Amended Plan to the extent that it does not believe that the Debtor is able to satisfy the requirements for confirmation for the following reasons: (1) the Amended Plan contains an improper classification of claims, (2) the Amended Plan exhibits a lack of good faith in that the improper classification was effectuated solely for the purposes of getting an impaired class to vote in favor of the Amended Plan, (3) the feasibility of the Amended Plan is in question because the Debtor’s financial projections are doubtful, and (4) the Amended Plan fails to overcome the “absolute priority rule” in that the “new value” exception has not been met.

Additionally, both the Internal Revenue Service and the Pennsylvania Department of Revenue filed Objections to the Amended Plan based on the its failure to provide statutory interest on a portion of their respective claims.  The Pension Benefit Guaranty Corporation also filed an Objection to the extent that the Amended Plan fails to include the requisite language explaining how the Debtor intends to treat its alleged obligation to provide retirement benefits to its employees; as such language was included in the Amended Disclosure Statement.

Finally, CAT Financial (“CAT”) filed an Objection to the Amended Plan to the extent that its fails to specify a time for closing and to the extent that it seeks to modify provisions of CAT’s security agreement.  

A hearing on the approval of the Amended Plan is currently scheduled for 4/1/11, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie. 

Court enters Order Approving Disclosure Statement and Scheduling Hearing on Plan Confirmation

On 3/1/11, the Bankruptcy Court entered an Order Approving Disclosure Statement and Scheduling Hearing on Plan Confirmation (“Order”) with respect to the Debtor’s Amended Chapter 11 Plan of Reorganization (“Plan”) and Amended Disclosure Statement previously filed on 2/17/11.  On or before 3/11/11, creditors will receive copies of these materials, including an official Ballot for the purposes of voting in favor of or against the Debtor’s Plan.  

In addition, the Order further sets for that 3/28/11 is the deadline for filing written ballots by creditors, for filing claims not already barred, and for filing objections to confirmation of the Plan.  

Finally, the Order further sets forth that 4/1/11 is the deadline for filing a complaint objecting to the Debtor’s discharge.  A hearing on the confirmation of the Plan has also been scheduled for 4/1/11 at 10:00a.m. in the Erie Bankruptcy Courtroom, United States Courthouse, 17 South Park Row, Erie, Pennsylvania 16501.

Debtor Files Amended Chapter 11 Plan of Reorganization and Amended Disclosure Statement

After the Court entered an Order denying the Debtor’s Disclosure Statement of 12/31/10 subsequent to the hearing held on 2/10/11, the Debtor on 2/17/11 filed an Amended Chapter 11 Plan of Reorganization (“Amended Plan”) and Amended Disclosure Statement, as required by subsequent Order of Court.  The Debtor now proposes to pay unsecured creditors with claims greater than $1,500.00 approximately ten percent (10%) over three (3) years, and those with claims equal to or less than $1,500.00 approximately fifty percent (50%) after Plan confirmation.  A hearing on the approval of the Amended Disclosure Statement is scheduled for February 24, 2011, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie.  

The Debtor also makes certain concessions in its Amended Disclosure Statement to address the prior Objections of Mercer County State Bank, the Pension Benefit Guaranty Corporation, and First Niagara Leasing, Inc.  Additionally the Debtor now includes more specific allocations for the approximately $80,000.00 in proceeds from its prior public auction of unencumbered assets. 

If you would like to have complete access to the Bankruptcy Court docket in this case, you can request a PACER I.D. by following the PACER link on this page, which will enable you to access the docket as well as view and print documents filed in the case.  Please also feel free to contact us at wldcommittee@quinnfirm.com to obtain a copy of the Amended Plan, Amended Disclosure Statement, or any other pleadings as filed.

Mercer County State Bank, Pension Benefit Guaranty Corporation Among Creditors Filing Objections to Debtor’s Disclosure Statement

As posted previously, on December 31, 2010, the Debtor filed its Chapter 11 Plan of Reorganization (“Plan”), Disclosure Statement to Accompany Chapter 11 Plan of Reorganization (“Disclosure Statement”), and Motion for Authority to Incur Secured Debt, to Enter into Financing Agreement with Mercer County State Bank (the “Bank”), and to Grant First Priority Liens pursuant to Bankruptcy Code Section 364(C) (“Motion”).  On January 31, 2011, the Bank filed an Objection to the Disclosure Statement to the extent that it does not adequately explain how the Debtor proposes to make a total distribution of approximately $2,124,000.00 when the Bank has agreed to lend no more than $2,000,000.00 to the Debtor pursuant to the refinancing proposed by the Motion.

In addition on January 28, 2011, the Pension Benefit Guaranty Corporation (“PBGC”) filed an Objection to the Disclosure Statement to the extent that it does not adequately explain how the Debtor intends to treat its alleged obligation to provide retirement benefits to its employees.

Finally on February 3, 2011, First Niagara Leasing Inc. (“First Niagara”) filed an Objection to the Disclosure Statement to the extent that it listed First Niagara’s claim in an amount lower than what First Niagara alleges its claim to be.

A hearing on the approval of the Disclosure Statement is scheduled for February 10, 2011, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie. 

Debtor Files Chapter 11 Plan of Reorganization, Disclosure Statement, and Motion for Authority for Plan Financing

On 12/31/10, the Debtor filed its Chapter 11 Plan of Reorganization (“Plan”) and Disclosure Statement, which proposes to pay unsecured creditors with claims greater than $250.00 approximately ten percent (10%) over three (3) years, and those with claims equal to or less than $250.00 approximately ninety percent (90%) after Plan confirmation.  A hearing on the approval of the Disclosure Statement has been scheduled for February 10, 2011, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie, with objections to the Disclosure Statement due by February 3, 2011.  

Also on 12/31/10 the Debtor filed a Motion for Authority to Incur Secured Debt, to Enter into Financing Agreement with Mercer County State Bank (the “Bank”), and to Grant First Priority Liens pursuant to Bankruptcy Code Section 364(C) (“Motion”).  By the Motion the Debtor seeks to obtain financing from the Bank in the amount of $2,000,000.00 for the purposes of funding the Plan and ongoing operations, in exchange for which the Bank will receive first priority liens on certain of the Debtor’s assets and assets of the Debtor’s principals.  A hearing on the Motion has also been scheduled for February 10, 2011, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie, with objections to the Motion due by February 3, 2011.  


If you would like to have complete access to the Bankruptcy Court docket in this case, you can request a PACER I.D. by following the PACER link on this page, which will enable you to access the docket as well as view and print documents filed in the case.  Please also feel free to contact us at wldcommittee@quinnfirm.com to obtain a copy of the Plan, Disclosure Statement, Motion, or any subsequently filed pleadings.