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Committee to File Competing Plan for Investors Lending Group

Thursday, 19 July 2012 00:50
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The Official Committee of Unsecured Creditors in the Chapter 11 case of Investors Lending Group LLC, intends to file its bankruptcy plan for the Debtor, saying the Debtor's plan is "unconfirmable".
 
"The Unsecured Creditors Committee will file a plan shortly," the Committee's lawyer, C. James McCallar, Jr., Esq., at the McCallar Law Firm, said in an e-mail to the Troubled Company Reporter.
 
Judge Lamar W. Davis Jr. resumed hearings on the disclosure statement explaining the Debtor's Chapter 11 plan on July 6.
 
Aside from the Committee, objections to the Disclosure Statement have been filed by The Bank of the Ozarks, and the Effingham County Tax Commissioner.
 
According to Mr. McCallar, the Debtor has not yet obtained approval of the Disclosure Statement.  Approval of the disclosure statement would have allowed the Debtor to begin balloting and seek a confirmation hearing on the Plan.
 
Committee Objection
 
In a document filed last month, the Creditors Committee says that, notwithstanding a second amendment to the disclosure statement, the document still cannot be approved because it does not provide adequate information which would allow a hypothetical investor of the unsecured class to make an informed judgment about the plan as required by 11 U.S.C. Sec. 1125.
 
The Committee also says in its objection dated June 22, 2012, that the Chapter 11 Plan as currently proposed cannot be confirmed.
 
The Committee says the Plan does not satisfy the absolute priority rule as set forth in 11 U.S.C. Sec. 1129, which would require payment in full of all unsecured claims unless such class agreed to a lesser treatment.
 
The U.S. Trustee and the Committee have complained that the Plan does not provide that unsecured claims will be paid in full with interest.  On the other hand, the current owner of the Debtor LLC will retain her 100% ownership interest in the business without contributing any new value.
 
The Debtor is not allocating all of its disposable income to the payment of unsecured claims, the Committee points out.
 
The creditors group complains that the Debtor has failed to disclose:
 
a. 47% of tenants are behind on their rental payments;
 
b. 51% of rentals are properties which serve as collateral of
the four secured creditors in this case;
 
c. the Debtor is incurring a loss of over $10,000 each month on
the properties which serve as collateral of the secured
creditors in this case;
 
d. rental income has been averaging approximately $18,000 per
month. Per the schedules, collections should be closer to
$27,000 per month.
 
Donald F. Walton, the U.S. Trustee, has withdrawn his objection to the Disclosure Statement.  Mr. Walton said that his objections were resolved by the Third Amendment to the Disclosure Statement.
 
The Chapter 11 Plan
 
As reported in the Troubled Company Reporter, the Debtor filed a Chapter Plan dated Feb. 17, 2012, that contemplates that the Debtor will continue the operation of the business.  According to the disclosure statement filed simultaneously with the Plan, unsecured creditors, classified under Class 5, will have two options for treatment of their claims:
 
(1) Creditors will receive a total dividend of 16% of their
Allowed Claim, in full and complete satisfaction of the
same.  They will be paid a pro-rata share of $800,000,
15 months from the Effective Date, and every 12 months
thereafter on the anniversary date of the first payment,
until the 16% dividend has been paid.  The length of time
required to satisfy those creditors who choose the Option 1
will depend on the number of creditors who choose Option 1
and the total amount of those creditors' claims.  The
Debtor estimates the pay-out period to be between 15 and 39
months from the Effective Date.
 
(2) Creditors who select this option will receive a total
dividend of 33% of their Allowed Claim, to be paid 60
months after the Effective Date, in full and complete
satisfaction of those claims.
 
No interest will be paid on any Class 5 Claim.
 
The Debtor on May 31, 2012, filed a third amendment to the Disclosure Statement.  Among other things, at the behest of the U.S. Trustee, the amendment added this language in the introduction of the Disclosure Statement:
 
"THE PLAN OF REORGANIZATION PROPOSED BY INVESTORS
LENDING GROUP, LLC, CANNOT BE CONFIRMED IF THE UNSECURED
CREDITOR CLASS VOTES TO REJECT IT."
 
A copy of the Feb. 17 Disclosure Statement is available for free at http://bankrupt.com/misc/INVESTORS_LENDING_ds.pdf
 
A copy of the May 31 amendment to the Disclosure Statement is available at http://bankrupt.com/misc/Investors_Lending_3rd_DS.pdf
 
A fourth amendment to the Disclosure Statement filed June 26, 2012, only provides that the Debtor will file objections to disputed claims on or before July 6, 2012, and all provisions in of the Disclosure Statement remain as set forth.
 
About Investors Lending
 
Based in Savannah, Georgia, Investors Lending Group LLC filed for
Chapter 11 (Bankr. S.D. Ga. Case No. 11-41963) on Sept. 21, 2011.
Judge Lamar W. Davis Jr. presides over the case.  James L. Drake,
Jr. P.C., acts as counsel to the Debtor.  The Debtor scheduled
assets of $14,197,900 and debts of $18,634,570.  The petition was
signed by Isaac L. Rabhan, CEO/assistant manager.
 
C. James McCallar, Jr., Esq., and Tiffany E. Caron, Esq., at McCallar Law Firm, in Savannah, Georgia, represent the Official Committee of Unsecured Creditors.
 
 
The Official Committee of Unsecured Creditors in the Chapter 11 case of Investors Lending Group LLC, intends to file its bankruptcy plan for the Debtor, saying the Debtor's plan is "unconfirmable".

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