Honorable Karen Overstreet Chapter 11 Hearing Date: August 15, 2003 Hearing Time: 9:30 a.m.
UNITED
STATES BANKRUPTCY COURT
WESTERN
DISTRICT OF WASHINGTON, SEATTLE DIVISION
IMPORTANT: THIS DISCLOSURE STATEMENT CONTAINS
INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE DEBTORS'
PROPOSED PLAN OF REORGANIZATION. PLEASE READ THIS DOCUMENT WITH CARE. THIS
DOCUMENT SUMMARIZES THE TERMS OF THE DEBTORS' PROPOSED PLAN. THE DEBTORS MAY
CONTINUE TO NEGOTIATE PAYMENT TERMS WITH THEIR CREDITORS, AND THE SPECIFIC
TREATMENT OF CLAIMS MAY CHANGE AS A RESULT, BUT THE PAYMENT TERMS WHICH THE
DEBTORS WILL ASK THE COURT TO APPROVE WILL IN NO CASE BE MATERIALLY LESS
FAVORABLE THEN THOSE DESCRIBED HEREIN.
| DEBTORS' DISCLOSURE STATEMENT - Page 1 |  |
TO ALL PARTIES IN ITEREST
On February 27, 2003, Love Israel
(“Israel”), Debtor in Possession, filed a voluntary petition under Chapter 11
of the Bankruptcy Code. On that same
date, Golden Triangle Development Inc. ("Golden Triangle"), Debtor in
Possession, also filed a voluntary petition under Chapter 11 of the Bankruptcy
Code. Thereafter, the Court administratively consolidated the Israel and Golden
Triangle (collectively, the "Debtors"). The Debtors' reorganization
cases are presently pending before the above-captioned court (the
"Bankruptcy Court" or "Court").
This
Disclosure Statement contains information with respect to the Debtors and the
proposed Plan of Reorganization (the "Plan"). Pursuant to &1125
Of the Bankruptcy Code ("Bankruptcy Code" or
"Code"), the Disclosure Statement is being distributed to you along
with a copy of me Plan to allow you to make an informed decision in exercising
your fight to accept or reject the Plan. This Disclosure Statement has been
approved by order of the Court pursuant to G 1125 of the Bankruptcy Code as
containing information of a kind, and in sufficient detail, a3 far as is
reasonably practicable under the circumstances, that would enable a
hypothetical reasonable investor to make an informed judgment about the Nan. In
the event of inconsistencies between the Man and the Disclosure Statement,
however, the terms of the Plan shall control. The Court's approval of this
Disclosure Statement does not constitute an endorsement of the Plan by the
Court.
The only representations that are
authorized or that may be made concerning the Debtors, We value of aces, or the
Man ate contained in this Disclosure Statement. The financial information
contained herein has not been subjected to an audit by an independent certified
public accountant, and for that reason the Debtors are unable to warrant or
represent that the information contained in this Disclosure Statement is
without inaccuracy. However, great effort has been made to ensure that all such
information is fairly represented.
The Debtors urge you to accept
their proposed Plan and to promptly return your completed ballot so that your
vote will be counted.
| DEBTORS' DISCLOSURE STATEMENT - Page 2 | |
I.
DEFINITIONS
Terms used in this Disclosure
Statement not specifically defined herein or in the Bankruptcy Code shall be
defined as set forth in the Plan of Reorganization that accompanies this
Disclosure Statement. In particular, capitalized terms shall have the meanings
prescribed for such terms in Section II of the Plan.
II.
INTRODUCTORY SUMMARY OF PROPOSED
PLAN OF REORGANIZATION
A complete
copy of the Debtors' proposed Plan accompanies this Disclosure Statement. The
discussion of the Plan that follows constitutes a summary only. You are urged
to read the Plan itself with care before deciding to accept or reject it.
In Summary, following Confirmation the Debtors shall continue to list the Olympic and Arlington Properties. The Debtors shall make best efforts to market and sell the Real Property for the highest and best prices available. The Debtors will seek Bankruptcy Court approval of all sales and sales shall be subject to Bankruptcy Court approval. The Debtors shall deposit the net sale proceeds (after deduction of closing costs and all allowed secured claims at closing) of each Real Property sale into the Distribution Account. From the Distribution Account, the Debtors shall first pay any unpaid administrative expenses. The debtors shall also deposit the net proceeds of the liquidation of non-exempt personal property into the Distribution Account. The Debtors shall then use the Distribution Account to service its debts as provided for under this Plan. If the Debtors do not sell the Olympic Property by September 26, 2003, Frontier Bank may immediately foreclose thereon. Likewise, if Debtors do not sell the Arlington Property by October 31, 2003, Asia Europe Americas Bank and Frontier Bank may immediately foreclose thereon.
The Plan
is more fully summarized in Section V with respect to each Ciass of Claims and
Interests. The Debtors believe that the terms and conditions set forth in the
Plan represent
| DEBTORS' DISCLOSURE STATEMENT - Page 3 | |
the best available treatment for
all classes of Claims and Interests and that the Plan is in the best interests
of all parties.
IIl.
BACKGROUND INFORMATION
A. Events Leading to Israel
Bankruptcy.
1. The
Arlington Property
Asia Europe Americas Bank ("Asia Bank") made a loan to Israel in the amount of $835,000 which was secured by a deed of trust on eight tax parcels of the property located at 14724 184 Street NE, Arlington, WA 98223 (the "Arlington Property"). Thereafter, Asia Bank made a second loan in 1999 in the amount of $680,000 secured by a deed of trust on twelve tax parcels of the Arlington Property. In 2000, a third loan in the amount of $101,000 was made by Asia Bank to Israel and secured by two new parcels and the twelve parcels included in the 1998 and 1999 deeds of trust. In February 2000, these three loans were consolidated in and Israel executed a promissory note in favor of Asia Bank in the amount of $1,600,000 and secured by a deed of trust on the Arlington Property (the "February Note"). Pursuant to the terms of the February Note, Israel was to make monthly payment with the final payment due on March 30, 2006.
On March
31, 2000, Asia Bank made a loan to Israel in the amount of $391,500 which was
secured by a construction deed of trust. This loan was thereafter increased in
April 2001 to $418,000 for which amount Israel executed a promissory note in
favor of Asia Bank and
secured by a deed of trust on the
Arlington Property (the "March Note"). Pursuant to the terms of the
March Note, Israel was to make monthly interest payments beginning on January
30, 2002 with a maturity date of March 30, 2002.
On July
16, 2001, Israel executed another promissory note in favor of Asia Bank in the
amount of $198,500 and secured by a deed of trust on the Arlington Property for
the purpose of completing the construction of the house (the "July
Note"). Pursuant to the terms of the March
| DEBTORS' DISCLOSURE STATEMENT - Page 4 | |
Note, Israel was to make monthly
interest payments beginning on January 30, 2002 with a maturity date of March
30, 2002.
Israel
defaulted on the February Loan by failing to make the January 2002 payment.
Israel also failed to make the months interest payments due under the March and
July Notes which were to begin on January 30, 2002.
2. The Family Home
Located at
the same address as the Arlington Property is the Debtor's residence which sits
on 25 acres (the "Family Home").
On or
about May 21, 1999, Israel executed a promissory note in favor of Frontier Bank
in the amount of $836,414.94. The promissory noted is secured by a first deed
of trust on the Family Home.
Thereafter, on or about December
8, 1999, Israel executed a second promissory note in favor of Frontier Bank in
the amount of $203,507.28. This second promissory note is secured by a junior
deed of trust on the Family Home.
3. The Olympic Property
On or
about February 12, 2001, Golden Triangle executed a promissory note in favor of
Frontier Bank in the amount of $1,029,380.71 (the "Promissory Note").
The Promissory Note is secured by a first deed of trust on that real property
commonly known as 231 & 239 N Olympic Avenue, 210 3`d Street, Arlington, WA
98223 (the "Olympic Property"). The ,Olympic Property consists of two
properties, one of which is a restaurant, the other a commercial building
leased to residential tenants. The Promissory Note is further secured by
property located in Stevens County which is valued at approximately $300,000.
For some
time, Israel, through a different company called The Bistro, operated the
restaurant and rented units in the tenant building. After experiencing
financial difficulties, Israel sole and financed the sale of the restaurant.
Unfortunately, the purchaser has been unable to make the payments pursuant to
the sale.
| DEBTORS' DISCLOSURE STATEMENT - Page 5 | |
Israel and Golden Triangle then
filed their respective Chapter I I proceedings on February 27, 2003.
B. Events
Since Bankruptcy.
Israel
previously filed detailed schedules of their assets and liabilities and a
statement of their financial affairs. Wells Fargo Bank was granted relief from
stay against Love Israel as to its secured claim on the 2001 Mitsubishi Montero
and the vehicle was surrendered.
The
Debtors entered into a Stipulation for Relief from Stay with Frontier Bank
pursuant to which Frontier Bank is granted immediate relief from stay so as to
enforce its state law foreclosure remedies with regard to the Olympic Property
on condition that Frontier Bank shall not schedule any foreclosure sale with
respect to the property prior to September 26, 2003.
The Debtors also entered
into a Stipulation for Relief from Stay with Asia Bank pursuant to which Asia
Bank is granted immediate relief from stay so as to enforce its state law
foreclosure remedies with regard to the Arlington Property on condition that
Asia Bank shall not schedule any foreclosure sale with respect to the property
prior to October 31, 2003.
In the
event of foreclosure, Frontier Bank and Asia Bank shall have no right to a
deficiency judgment and any unsecured portion of their claim shall be
discharged.
These
documents may be reviewed at the Bankruptcy Court clerk's office during normal
business hours.
| DEBTORS' DISCLOSURE STATEMENT - Page 6 | |
IV. GOLDEN TRIANGLE ASSETS AND
LIABIIITIES.
A. Assets
The value of Debtor's assets are approximated below as of the date of this Disclosure Statement:
1. Real Property:
The value
of Debtor's Real Property is estimated at $1,300,000.00. The following table
shows the schedule of values for the real property.
|
|
APN/Tax
No./Lot# |
Address |
Value |
|
1. |
00378800101901 & 00378800101902 |
231, 235 239 Olympia Avenue, Arlington, Washington |
$1,300.000 |
2. Personal Property:
Cash on Hand $0
Cash in Bank
Checking
Account $700.00
TOTAL PERSONAL PROPERTY: $700.00
B. Liabilities
As of the
Petition Date, the Golden Triangle's schedules showed total liabilities of $1,138,911.19,
including secured claims of $1,103,488.19, priority claims of $29,048.39 and
general unsecured claims of $6,374.61. Golden Triangle Development, Inc.
included in their schedules the claims of judgment holders who had filed liens
against the Real Property.
Golden
Triangle Development, Inc. believes, to the best of its knowledge, information,
and belief at this time, that the liabilities set out on the official schedules
as modified by actions over time, by the creditors' proof of claim, and orders
of the bankruptcy court, are a full and complete estimation of all liabilities
of Golden Triangle Development, Inc. as of the respective
| DEBTORS' DISCLOSURE STATEMENT - Page 7 | |
filing dates of such schedules,
actions, orders and proofs of claim, except as otherwise noted herein.
1. Priority Cost of Administration
Claims.
Debtor's
current administrative expense claims in the form of professional fees and
costs are in the approximate amount of $15,787.41. The administrative fees are
owed to Lasher Holzapfel Sperry it Ebberson P.L.L.C. (the "Lasher
firm"), the Debtors' attorneys. Additional pre-confirmation professional
fees to the Lasher firm are difficult to estimate and are dependent on the
amount of time that creditors and other parties in interest require the Lasher
firm to spend in order to confirm the Plan. Currently, the Lasher firm
estimates that pre-confirmation fees may total approximately $25,000 which
would include the accountants and attorney fees.
All
administrative expenses will be paid in full within 60 days of confirmation,
subject to court approval if required.
2. Priority
Tax Claims
a. Department of the Treasury asserts
that it is owed approximately $13,044.00 for unpaid taxes. The debtor disputes
this claim.
b. Snohomish County Treasurer is owed
approximately $16,008.39, including $12,264.00 on account #27014 0, $3,744.39
for unpaid personal property taxes for the Olympic Property.
3. Secured Claims.
a. Frontier Bank is owed approximately $1,016,628.27 under a promissory note, secured by a first deed of trust on the Olympic Property and real property located in Stevens County. The Debtors entered into a Stipulation for Relief from Stay with Frontier Bank pursuant to which Frontier Bank is granted immediate relief from stay so as to enforce its state law foreclosure remedies with regard to the Olympic Property on condition that Frontier Bank shall not schedule any foreclosure sale with respect to the property prior to September 26, 2003.
| DEBTORS' DISCLOSURE STATEMENT - Page 8 | |
b. Cascade Bank is owed
approximately $83,619.92, which amount is secured by a deed of trust on the
Arlington Property and Golden Triangle's checking account at said institution.
c. Seco Construction Equipment is owed
$3,240.00, secured by a lien on the Arlington Property.
4. Unsecured
Non-Priority Claims.
Golden
Triangle Development, Inc. owes the following pre-petition non-insider non-priority
general unsecured claims that have filed proofs of claim prior to the claims
bar date:
a. Bank of
America $6,374.61
The
allowed class 6A creditors will be paid in full in installments which shall
begin after payment classes 1A through 5A from net unencumbered proceeds and
will continue to do so from the sale of real estate until all allowed class 6A
creditors are paid in full, including interest. The unpaid balance shall accrue
interest at the rate of 5% per annum until paid in full.
V. ISRAEL'S ASSETS AND LIABILITIES.
A. Assets
The value
of Love Israel's assets are approximated below as of the date of this
Disclosure Statement:
1. Real Property:
The value of Love Israel's Real Property is estimated at $5,290,000. The following table shows the schedule of values for the real property.
|
|
APN/Tax
No./Lot# |
Address |
Value |
|
1. |
213106-1-006-0004, 310622-002-00600 f/k/a
223106-2-006-0001, 213106-1004-0006, 310622-002-005-00 f/k/a
233106-2-005-0002 |
14724184TH St, Arlington, WA [Family Home - 25 acres] |
$1,440,000.00 |
| DEBTORS' DISCLOSURE STATEMENT - Page 9 | |
|
|
APN/Tax
No./Lot# |
Address |
Value |
|
2. |
310622-003-003-00, 310622-003-00400, 310621-004019-00, 310622-002005-00, 310622-002-006-00,310622-003-001-00, 310621-004-013-00, 310621-001-010-00, 310621-00401200, 310621-00401400, 310621-004015-00, 310621-004016-00, 310621004017-00, 310621-004-018-00, 310622-002-007-00, 310621-001-01100, 310621-001-012-00, 310621-001013-00. 310621-001-01400, 310621001-007-00. 2-005-0002 |
14724184TH St, Arlington, WA [Arlington Property - 250
acres] |
$3,550,0001 |
|
3. |
5096842593 |
Lake Stevens, WA |
$300,000.00 |
2. Personal
Property:
Cash on HandCash in BanksWashington State Employees Credit Union Stumpage value for lumbar located on 14724 184th Street
NE, Arlington, WA Household Goods and Furnishings Books, pictures and other
art objects, Wearing Apparel, personal clothing 100% interest in Golden
Triangle Pistol Automobiles: 1998 Windsport 33' RV (1/2 |
$300.00$300.70$549.23 $598.56 $1,217,484.002 $1,000.00 $200.00 $200.00 $0 $400.00 $32,000.00 |
--------------------------------------------
1 AEA Bank
has contested this valuation and asserts that the total value of the real
estate is less than the full amount of its claim when interest, fees and costs
are taken into account.
2 AEA Bank
has contested this valuation and asserts that the total stumpage value is less
than the full amount of its claim when interest, fees and costs are taken into
account.
| DEBTORS' DISCLOSURE STATEMENT - Page 10 | |
interest)
TOTAL
PERSONAL PROPERTY: $1,251,131.49
B. Exemptions
1. Real
Property
Debtor's principal residence
homestead $40,000.00
(RCW 6.13)
2. Household Goods & Furnishings $1,000.00
3. Automobile $2,400
4. Books,
Pictures and Other Art Objects Books,
Framed
paintings & prints $200.00
5. Wearing
apparel Personal clothing
Personal clothing $200.00
6. Pistol $400.00
7. Cash $44,600
TOTAL
EXEMPTIONS:
C. Liabilities
As of the Petition Date, the Love Israel's schedules showed total liabilities of $4,152,836.79, including secured claims of $1834,995.57, priority claims of $25,159.11 and general unsecured claims of $292,682.11.
Love
Israel believes, to the best of his knowledge, information, and belief at this
time, that the liabilities set out on the official schedules as modified by
actions over time, by the creditors' proof of claim, and orders of the bankruptcy
court, are a full and complete estimation of all liabilities of Love Israel as
of the respective filing dates of such schedules, actions, orders and proofs of
claim, except as otherwise noted herein.
2. Priority
Cost of Administration Claims.
Debtor's current administrative expense claims in the form of professional fees and costs are in the approximate amount of $15,787.41. The administrative fees are owed to Lasher Holzapfel Sperry & Ebberson P.L.L.C. (the "Lasher firm"), the Debtors' attorneys. Additional pre-confirmation professional fees to the Lasher firm are difficult to estimate and are dependent
| DEBTORS' DISCLOSURE STATEMENT - Page 11 | |
on the amount of time that
creditors and other parties in interest require the Lasher firm to spend in
order to confirm the Plan. Currently, the Lasher firm estimates that
pre-confirmation fees may total approximately $25,000 which would include the
accountants and attorney fees.
All
administrative expenses will be paid in full within 60 days of confirmation,
subject to court approval if required. Administrative expenses will be paid
from the proceeds of the sale of the debtor's real property if sufficient
proceeds remain after satisfying all respective secured claims.
3. Priority Tag Claims.
a. Department of the Treasury is owed
approximately $750.00 for unpaid taxes.
b. The Snohomish County Treasurer is owed
approximately $16,392.42, including $11,862.27 in real estate taxes, $3,744.99
on account #0270140 in unpaid taxes and $785.06 on a closed tax account.
c. The Stevens County Treasurer is owed approximately
$1,120.51 for unpaid taxes.
d. The State of Washington is owed
approximately $6,896.18, including $6,209.00 on Audit #6328000 conducted March
28, 2003 and $687.18 in excise taxes on for Jordan Village Farm #601 980 914.
4. Secured Claims.
a. Frontier Bank is owed
approximately $1,083,513.00, which amount is secured by a first deed of trust
on the Family Home. The Debtors entered into a Stipulation for Relief from Stay
with Frontier Bank pursuant to which Frontier Bank is granted immediate relief
from stay so as to enforce its state law foreclosure remedies with regard to
the Olympic Property on condition that Frontier Bank shall not schedule any
foreclosure sale with respect to the property prior to September 26, 2003.
b. Asia Europe Americas Bank is owed
approximately $2,480,090.16, pursuant to three promissory notes executed
individually by Love Israel and secured by
| DEBTORS' DISCLOSURE STATEMENT - Page 12 | |
the Arlington Property. Asia Europe Americas Bank asserts that the balance due
on its secured claim is $2,622,202.20 including contract interest, attorneys
fees and costs July through 31, 2003. Asia Europe Americas Bank further
asserts that there in per diem interest o± $70l 10. The Debtors entered into a Stipulation for Relief from Stay
with Asia Europe Americas Bank pursuant to which Asia Europe Americas Bank is granted
immediate relief from stay so as to enforce its state law foreclosure remedies
with regard to the Arlington Property on condition that Asia Europe Americas
Bank shall not schedule any foreclosure sale with respect to the property prior
to October 31, 2003.
c. Cascade Bank is owed
approximately $83,619.92, which amount is secured by a deed of trust on the
Arlington Property and Golden Triangle's checking account at said institution.
d. Wells Fargo Bank is owed
approximately $50,548.05, which is secured by a 1998 Windsport 33' RV
e. Genon Hunter - is owed
$37,500, which is secured by a Deed of Trust on the Arlington Property.
f. Eliasaph Israel - is
owed $80,000, which is secured by an
August 12, 1997 Deed of Trust on the Arlington Property.
g. Albert Postemma -is owed
$19,724.44, which is secured by a January 23, ,2003 Deed of Trust on the
Arlington Property.
4. Unsecured
Non-Priority Claims.
Love Israel owes the following pre-petition non-insider non-priority general unsecured claims that have filed proofs of claim prior to the claims bar date:
|
a. |
AAA Financial |
$28,771.84 |
|
b. |
Alpine Fire and Safety |
$89.73 |
|
C. |
American Express Account
#3723-186280-31003 |
$41,088.57 |
|
d. |
American Express Account
#3782-080998-73005 |
$1,154.18 |
| DEBTORS' DISCLOSURE STATEMENT - Page 13 | |
|
e. |
American Express Platinum #
3713-820152-54009 |
$9,830.61 |
|
f. |
Asia Europe Americas Bank #
4388-4073-7000-1142 |
$8,107.72 |
|
g. |
Barnett Implement |
$1,742.57 |
|
h. |
Beth Gold DDS |
$3,669.28 |
|
i. |
Capital One FSB |
$618939 |
|
j. |
Cascade Natural Gas |
$54827 |
|
k. |
Citibank Platinum |
$15,000.00 |
|
l. |
Commercial Capital Development |
$5,718.81 |
|
m. |
Dale Duskin |
$8,002.43 |
|
n. |
Goetz S: Sons |
$183.72 |
|
o. |
Help Card Processing Center |
$2,429.97 |
|
p. |
Janette Sheehan |
$30,000.00 |
|
q. |
Lease Comm |
$55&57 |
|
r. |
Leibold Communications |
$197.76 |
|
s. |
Merchants Services |
$400 |
|
t. |
Nordstrom |
$13,408.69 |
|
u. |
Qwest |
$122.09 |
|
v. |
Refrigeration and Heating, Inc. |
$150000 |
|
w. |
Sysco Food Services |
$1,017.00 |
|
x. |
Universal Fidelity Corp. |
$1,005.57 |
|
y. |
US Bank Account #55 425 1666448 |
$20,900.00 |
|
z. |
US Bank Account
#4833-4980-0002-1163 |
$4,421.91 |
|
aa. |
Verizon |
$490.00 |
|
bb. |
Verizon Account
#030203100759451907 |
$3,063.02 |
|
cc.. |
Verizon Northwest #03 0203
1040692788 03 |
$568.36 |
|
dd. |
Waste Management |
$531.46 |
|
ee. |
Wells Fargo |
$76,017.02 |
| DEBTORS' DISCLOSURE STATEMENT - Page 14 | |
|
ff. |
Zep Manufacturing Company |
$50.57 |
The allowed class 12B creditors will be paid in full in installments which shall begin after payment of classes IB through 11B from net unencumbered proceeds and will continue to do so from the sale of real estate until all allowed class 12B creditors are paid in full, including interest. The unpaid balance shall accrue interest at the rate of 5% per annum until paid in full.
VI.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS
As previously stated, you are urged to read the Plan itself with care before deciding to accept or reject it and not to rely solely on any summary of the Plan in this Disclosure Statement.
A. Classification
of Claims and Interests
The Plan classifies six classes of Claims and one interest for Golden Triangle and nine class of Claim and one Interest for Love Israel. If the Plan is confirmed by the Court and becomes effective, the class into which each Allowed Claim and Interest fits will determine the manner in which such Claim or Interest will be treated. The classed defined in the proposed Plan are summarized below.
Section
1123 of the Bankruptcy Code requires that, with certain exceptions, the Plan
classify all Claims against, and all equity Interests in, the Debtors. Pursuant
to § 1122 of the Bankruptcy Code, the Plan may place in the same class only
Claims or Interests, which are substantially similar. Section 1122 further
requires that the Plan provide the same treatment for all Claims or Interests
in the same Class, unless the holder of a particular Claim or Interest agrees
to the less favorable treatment.
B. Unclassified
Claims.
Pursuant to § 1123(a)(1) of the Bankruptcy Code, certain Claims are not separately classified. Such unclassified Claims in the Plan include (i) Administrative Expense Claims, which include, among other things, fees and costs of attorneys and other professionals engaged
| DEBTORS' DISCLOSURE STATEMENT - Page 15 | |
by the Debtors; (ii)
trade/ordinary course of business expense Claims, which are those priority. Claims arising from goods and services
provided to the Debtors after the Petition Date in the ordinary course of their
business operations; and (iii) Priority Tax Claims, which are Claims for a tax
obligation owed to any taxing entity of any federal, state or local government
that is entitled to priority pursuant to § 507(a)(8) of the Bankruptcy Code,
and also U.S. Trustee Fees payable under the Bankruptcy Code.
C. Plan
Classification Summary for Golden Triangle. Development, Inc.
Class 1A: The
Priority Tax Claim the Department of Revenue
Class 2A: The
Priority Tax Claim of Snohomish County
Class 3A: The
Secured Claim of Frontier Bank
Class 4A: The
Secured Claim of Cascade Bank.
Class 5A. The Secured Claim of Seco Construction Equipment..
Class 6A: General Unsecured Claims.
D. Plan
Classification Summary for Golden Love Israel
Class IB: The
Priority Tax Claim of the Department of Revenue
Class 2B: The Priority Tax Claim
of Snohomish County
Class 3B: The
Priority Tax Claim of Stevens County
Class 4B: The
Priority Tax Claim of the state of Washington
Class 5B: The
Secured Claim of Frontier Bank
Class 6B: The
Secured Claim of Asia Europe Americas Bank
Class 7B: The Secured Claim of Cascade Bank.
Class 8B: The Secured Claim of Wells Fargo Bank.
Class 9B: The Secured Claim of Genon Hunter.
Class 10B: The
Secured Claim of Eliasaph Israel.
Class 11B: The
Secured Claim of Albert Postema.
Class 12B: General
Unsecured Claims.
E. Treatment
of Claims and Interests
The specific proposed treatment
for the various classes of Claims and Interest is described in the Plan and
summarized below. Notwithstanding the summary provided in this Disclosure
Statement, the terms of the Plan shall control the classification and treatment
of Claims and Interests and all other aspects of the Debtors' rights and
| DEBTORS' DISCLOSURE STATEMENT - Page 16 | |
obligations as to matters governed
by the Plan following the Effective Date. Parties are urged to read the Plan
with care to determine the treatment proposed for their Claim or Interest.
VI.
LIQUIDATION ANALYSIS
The
Bankruptcy Code requires that a creditor with a right to vote either accept the
Plan, or, alternately, that the creditor receive under the Plan at least as
much as it would receive if the Debtors' assets were liquidated in a and the
proceeds distributed under Chapter 7 liquidation. This is generally known as
the "best interests" test. As set forth below, the Debtors believe
that the Plan satisfies the standard.
To apply
the test, the Debtors' assets are valued in the context of the value that would
be generated from their distressed liquidation in the context of a Chapter 7
case by a Chapter 7 trustee appointed by the Bankruptcy Court. The estimated
values take into account the costs and expenses of the liquidation, and such
additional administrative and priority claims that may result from the
deduction of the Debtors' exemptions. Net liquidation proceeds would be paid to
general unsecured creditors only to the extent funds are available after
secured creditors have been paid the full value of their collateral and
priority creditors receive full payment on their claims.
In this
case, a Chapter 7 Trustee would attempt to liquidate the Real Property.
Liquidation of the Real Property by Chapter 7 Trustee would generate distressed
bidding and less value for the estate than controlled marketing of the Real
Property over a reasonable amount of time. Thus, it is the Debtors' business
judgment that creditors will receive more under this Plan than under a Chapter
7 liquidation. In addition, the Debtors' are able to avoid
| DEBTORS' DISCLOSURE STATEMENT - Page 17 | |
paying excise tax on sales of Real Property after confirming a chapter 11 plan pursuant to WAC 458-61-230. This exemption is not available to a chapter 7 trustee.
VII.
RISK FACTORS
Distributions
to creditors contemplated under the Plan are contingent upon many assumptions,
some or all of which could fail to materialize and preclude the Plan from
becoming effective or reduce anticipated distributions. These include, but are
not limited to, the inability to sell the Debtors' real estate in a timely
manner. Most important, however, is that the Plan is subject to approval by the
various classes of creditors entitled to vote under the Bankruptcy Code and to
confirmation of the Plan by the Bankruptcy Court. No assurance can be given
that the Plan will be accepted by the requisite number and amount of creditors
or confirmed by the Court. In that event, due to the costs and uncertainties
inherent in a modified Plan of Reorganization or a conversion and liquidation
under Chapter 7, all creditors of the estate face substantial risk that their
recovery under such alternative circumstances may be substantially less
favorable than their recovery provided for by the Plan.
VIII.
CONFIRMATION OF THE PLAN
A. Voting
Procedures
A ballot to be used for voting your acceptance or rejection of the Debtors' Plan of Reorganization is being mailed to you together with this Disclosure Statement and Plan. Holders of claims should read the instructions carefully, complete, date and sign the ballot, and transmit it in the envelope enclosed. IN ORDER TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED AT THE INDICATED ADDRESS NOT LATER THAN 5:00 P.M. ON SEPTEMBER 21, 2003. FAILURE TO VOTE OR A VOTE TO REJECT THE PLAN WILL NOT AFFECT THE TREATMENT TO BE ACCORDED A CLAIM OR INTEREST IF THE PLAN NEVERTHELESS IS CONFIRMED.
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If more
than one-half in number of claimants voting and at least two-thirds in the
amount of the allowed claims of such claimants in each class of claims vote to
accept the Plan, such classes will be deemed to have accepted the Plan. If at least two-thirds in amount of the shares voted in a class of
equity interests are voted to accept the Plan, such Class will be deemed to
have accepted the Plan. For purposes of
determining whether a class of claims or interests had accepted or rejected the
Plan, only the votes of those who have timely returned their ballots will be
considered.
B. Hearing
on Confirmation
The
hearing on confirmation of the plan has been set for September 26, 2003 at 9:30
a.m. before the honorable Karen Overstreet, Untied States Bankruptcy Judge,
United States Bankruptcy Court, 1200 Sixth Avenue, Seattle, Washington,
98101. The Bankruptcy Court shall
confirm the Plan at that hearing only if certain requirements, as set forth in § 1129 of the Bankruptcy Code, are satisfied.
C. Feasibility
The Debtors must also establish that confirmation of the Plan is not likely to be followed by the Reorganized Debtors’ liquidation, or the need for further financial reorganization. The Debtors intend to present testimony with respect to feasibility, if required, at the hearing on confirmation of the Plan. The Debtors believes that the Plan is feasible and that the Bankruptcy Court will so find, but a Bankruptcy Court finding of feasibility does not guarantee that the Debtors will successfully complete or pay all its obligations under the Plan.
D. Treatment
of Dissenting Classes of Creditors
The
Bankruptcy Code requires the Bankruptcy Court to find that the Plan does not
discriminate unfairly, and is fair and equitable, with respect to each class of
claims or interests that is impaired under, and has not accepted, the
Plan. Upon such a finding, the
Bankruptcy Court may confirm the Plan despite the objections of a dissenting class. The Debtors have requested that the Court
confirm the Plan even if creditors holding claims in impaired classes do not accept
the Plan.
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E. Effect of Confirmation
Confirmation of the Plan shall operate on the Effective Date as a discharge of the Debtors from all claims and indebtedness that arose before the Effective Date, except for those unclassified claims that the Reorganized Debtors agree to pay as a continuing obligation. All such discharged claims and indebtedness shall be satisfied by the cash payment or other consideration provided under the Plan. Upon Confirmation, all property of the Debtors' state shall be free and clear of all claims and interests of creditors, except as otherwise provided in the Plan or the order of the Bankruptcy Court confirming the Plan. The Reorganized Debtors shall be vested with all assets of the Debtors' estate. The provisions of the Plan shall bind the Debtors, the Reorganized Debtors, and all other parties in interest, including any creditor of the Debtors, whether or not such creditor is impaired under the Plan and whether or not such creditor has accepted the Plan.
F. Consequences
of the Failure to Confirm the Plan
In the event the Court declines to
confirm the Debtors' Plan, whether due to a failure of creditor support or
otherwise, a liquidation might ultimately result, either through a revised Plan
under Chapter I I or conversion of this Chapter I I case to a bankruptcy under
Chapter 7 of the Bankruptcy Code. As set forth in Section VI of this Disclosure
Statement, it is likely that creditors would receive a significantly reduced
recovery under a liquidation.
RESPECTFULLY
SUBMITTED this 15th day of August, 2003.
Kevin Hanchett, WSBA #16553
Attorney for
GOLDEN
TRIANGLE DEVELOPMENT, INC.
LOVE
ISRAEL d.b.a. ISCO
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