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Jackson Green's case to be converted

by Hayley Kaplan | Published May 23, 2012 at 4:08 PM

Jackson Green LLC's bankruptcy case will be converted to a Chapter 7 proceeding after the company sold its Chicago properties to its noteholder.

Judge Thomas S. Utschig of the U.S. Bankruptcy Court for the Western District of Wisconsin in Eau Claire is expected to sign an order converting the case from a Chapter 11 to a Chapter 7 on or after June 12, court papers said.

The Minocqua, Wis.-based debtor sold its commercial office building and parking lot in Chicago to noteholder Credit Suisse First Boston Mortgage Securities Corp. through a $10.15 million credit bid after the parties came to an agreement.

Since the properties were sold to the noteholder, U.S. Trustee Patrick S. Layng on May 21 requested the case be converted to a Chapter 7 liquidation or dismissed. Court filings show that since no parties have objected, an order converting the case to a Chapter 7 liquidation will be entered on or after June 12.

Wells Fargo Bank NA, the trustee for the noteholder, originally sought to dismiss the Chapter 11 case, Jackson Green's second, through a June 24, 2011, motion asserting that it was made in bad faith because it was a serial filing. But the May 16 dismissal hearing was canceled after the parties came to an agreement regarding the fate of the properties.

Jackson Green's sale of its properties to the noteholder settles Wells Fargo's dismissal motion.

Utschig signed an order May 4 approving the sale of the properties to the noteholder.

Under an agreement between the debtor and noteholder, which Utschig approved April 25, the debtor and noteholder agreed to resolve all its disputes and sell the properties to the noteholder through a $10.15 million credit bid.

Jackson Green owes Credit Suisse First Boston Mortgage Securities at least $22 million through a mortgage note, court documents said.

The judge was also set to consider bidding procedures for the sale of its properties at the May 16 hearing.

According to a sale motion filed Nov. 15, Jackson Green said it would pursue the sale to the noteholders over a public auction because the sale to the lender was in the best interest of the estate.

However, Jackson Green was simultaneously considering another sale motion that provided for an auction of its properties.

Under the bidding procedures filed Oct. 7, interested suitors would have had to deposit $600,000 for the properties to participate in the auction. Bidding would have been open to the public, and no stalking-horse bidder was named in court documents.

Bidding would have opened with the highest offer, and subsequent offers would have increased at the discretion of the auctioneer. The noteholder would have been allowed to credit-bid at the auction.

Sheldon Good & Co. had been retained to market the debtor's properties.

Jackson Green's properties were appraised to be worth approximately $10.15 million.

Jackson Green filed for Chapter 11 protection for the second time on June 23. It first filed for bankruptcy on Jan. 9, 2009, and exited June 14, 2010.

Jackson Green was in default of its mortgage note when it filed for Chapter 11 protection the second time. A condition of the confirmation order from its previous Chapter 11 case was that it would repay the mortgage. Utschig, who was also the judge on Jackson Green's first bankruptcy case, confirmed the debtor's reorganization plan outlining its payments to creditors on May 18, 2010.

As a result of the default, the U.S. trustee initiated a foreclosure action and filed a motion to appoint a receiver in the Circuit Court of Cook County in Illinois on June 13. The debtor filed for bankruptcy in order to halt the appointment, which was scheduled for June 24.

Jackson Green owns a commercial office building and parking garage on West Jackson Boulevard and South Green Street in Chicago.

The debtor's equity holders include David Heyes (with a 49% stake), Jackson Green Associates Inc. (1%) and Paul Heyes (50%).

The company listed $10 million to $50 million in assets and liabilities in its petition.

Debtor counsel James V. Block of Byrne & Krautkramer Law Office did not respond to requests for comment.

Jill L. Nicholson of Foley & Lardner LLP is counsel to Wells Fargo.

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