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Objections to DIP, disclosure statement await 400 Blair

by Hayley Kaplan | Published November 14, 2011 at 4:07 PM

Bankrupt 400 Blair Realty Holdings LLC will face objections from the indenture trustee to its secured lender on Thursday, Nov. 17, as the single-asset real estate company seeks final approval for a debtor-in-possession financing and its disclosure statement.

The SARE owns a 181,000-square-foot industrial building, which sits on 14.7 acres of land located on Blair Road in Carteret, N.J.

According to 400 Blair's disclosure statement, filed Oct. 3, administrative claims, which the company estimates would total between $150,000 and $200,000, would be paid in full in cash on the effective date.

All of the debtor's lender's claims would be treated the same under the plan. All of the lenders would be paid monthly over a period of four years with a balloon payment at the end of the fourth year. Interest on the claims would be amortized over 20 years.

400 Blair's claims include the secured claims of the tax collector for the borough of Carteret (owed $120,000), Solomon Brothers Mortgage Securities VII Inc. ($8.74 million) and general unsecured claims, which total $2.25 million -- $1.23 million are insider claims.

Equity holders would retain their interests under the plan. The debtor's equity holders include Success-Treuhand GmbH and United Land Resources LP, which each hold a 50% stake in 400 Blair.

But Wells Fargo Bank NA, the indenture trustee to secured lender Solomon Brothers Mortgage Securities VII, objected to 400 Blair's disclosure statement and said the plan was unconfirmable. The bank said the debtor wouldn't be able to sell or refinance its mortgage in time to make the balloon payments called for in its reorganization plan.

The debtor is also seeking final permission to borrow up to $500,000 in new-money DIP financing from equity holder United Land Resources, court documents filed Oct. 25 said. The DIP would be secured by a junior lien against all the debtor's property and accrue 10% per annum interest. No maturity date was specified in court documents.

Since the property isn't currently generating significant revenue, court documents said, 400 Blair would use the DIP to fund its postpetition obligations.

Judge Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey in Trenton granted the debtor interim permission to use up to $50,000 of the financing on Oct. 31.

Wells Fargo objected to the DIP, too, asserting that 400 Blair did not contain enough details about why the debtor needed such a large financing since the company's upcoming tax and insurance payments are only for $62,000 and $25,000, respectively.

The debtor bought its property on Aug. 6, 1999, and formed 400 Blair on June 12, 2000. The property is occupied by Nu-World Corp., which rents the property for $9,166 a month.

The debtor estimates the property to be valued at $13 million. Wells Fargo estimates the property to be worth no more than $12.1 million.

Solomon Brothers commenced foreclosure proceedings against 400 Blair on April 13, 2010, and sought the appointment of a receiver.

Jonathan Schultz of Onyx Equities LLC was appointed as receiver of 400 Blair on Sept. 1, 2010.

A foreclosure judgment was entered by the U.S. District Court for the District of New Jersey on July 25, which the debtor is now appealing. The appeal process was stayed when 400 Blair filed for Chapter 11 on Sept. 23.

The debtor is seeking the removal of the receiver so that it can regain control of the management of its property.

Debtor counsel Morris S. Bauer of Morris, McLaughlin & Marcus PA didn't respond to requests for comment.

Neither did Kenneth S. Yudell of Aronauder, Re & Yudell LLP, who represents Wells Fargo.

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Objections to DIP, disclosure statement await 400 Blair

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