Jacksonville Daily Progress
Officials with the bank primarily responsible for providing Lon Morris College with nearly $1.4 million in loans to defray procedural bankruptcy costs are hoping to at least pause the Feb. 4 conclusion of LMC's liquidation proceedings long enough to get their money back.
Representatives of the Amegy National Bank Association say they "object to the sale and thus confirmation of the plan in its current form” because the conclusion of a Chapter 11 confirmation would absolve LMC of all financial obligations – including the collateral Amegy needs to get the loans paid.
This is at least the sixth objection filed in federal bankruptcy court against LMC's Feb. 4 auction confirmation and estate liquidation — not counting the city of Jacksonville's complaint that the college estate auctioned off property it legally owns despite being repeatedly asked not to. (Federal Judge Bill Parker will be called upon to resolve that particular issue.)
James Matthew Vaughn, attorney for Amegy, did not return a request for comment Monday, nor did Chief Restructuring Officer Dawn Ragan of Bridgepoint Consulting nor Houston attorney Hugh Ray III from the Texas offices of McKool Smith.
Amegy officials contend the $2.2 million the auction raised wasn't enough and that any finalization of the LMC liquidation plan will sever critical financial ties once and for all — including property that was presented to Amegy as collateral for the loans.
"The debtor (Lon Morris) would not engage in business at the consummation of the plan," states the objection, "The debtor would be denied a discharge in Chapter 7, and the plan provides for the liquidation of all or substantially all of the property of the estate."
Amegy also reserves the right to withdraw the objection at any time.
Amegy bank representatives specifically object to the clean slate a Chapter 11 discharge would afford LMC, scrubbing away any further debt that arose prior to confirmation of the plan.
Amegy contends the final disposition plan drafted by Ragan "discriminates unfairly and is not fair and equitable."
Amegy, LMC's primary secured creditor, has by far been the largest bank presence in these proceedings. Its presence loomed heavily over the recent auction.
According to court reports, Ragan initially considered declaring Chapter 7 Bankruptcy, but decided to go with Chapter 11 after Amegy Bank agreed to provide the college with a $750,000 DIP loan.
Ragan subsequently used the loan money to file for Chapter 11 in July and to try to sell the college, according to reports.
The second, $500,000, loan was imparted to LMC by a consortium of lenders led by Amegy, which continues to negotiate with the LMC bankruptcy estate about matters that include , "the sale of certain assets securing the repayment of the debtor's obligations to Amegy."
Ultimately, Amegy reps say they are unwilling to agree to the sale of their collateral at the current high bid garnered in the auction.
The other entities that have also filed objections against finalization of liquidation include Texas National Bank in regard to property, mineral and royalty interests; the Cherokee County Appraisal District plus Grayson, Gregg, Smith, Marion and Upshur Counties in regard to liens and over $5,000 in 2012 taxes; and the Scurlock Foundation, which contends the plan discriminates against its property and claims.
The Texas Workforce Commission also has filed an objection to the finalization to recover $16,631.69 in employment taxes. The Methodist Children's Home of Waco, filed a similar motion on the grounds that property willed to LMC should revert to them now that the college has ceased to exist.
By the terms of the Lon Morris liquidation, all claims, agreements, employee benefit plans or benefits will be rendered null and void after the plan is approved by the federal court judge.
Also, by the terms of the plan. Ragan, all other professionals retained by the bankruptcy estate – or any of their agents or successors – the estate itself, and certain members of the former board of trustees can't be held liable for their actions in connection with this case by any claimholder, interest holder, or other party of interest. This includes acts of omission, the case itself or the decision to file bankruptcy.
This clause does not apply to any actions the Texas Attorney General's Office may take against the Ragan camp after the confirmation hearing.