My last post about FR’s Bankruptcy case was on February 7, 2011. Today, I’m going to give you an “update”.
This morning, I visited www.pacer.gov to review the latest filings with the Bankruptcy Court. (You can access “pacer” yourself, if you would like to, but you do have to register for access.)
Now, I’m going to give you a summary of what I just read (in the documents very recently filed with the BK Court.) There is always the chance that some of the comments in my summary are not correct, so I urge you to read the documents yourself, if you are interested in knowing exactly what’s put forth in the documents. At the end of this post, I’m going to give you links to the documents I reviewed. (I’ve used my Google Docs sites to host pdf files of the documents.)
1. As regards the “amended schedules” filed with the BK Court on Feb 24, 2011, there are three “classes” of creditors listed:
a. Creditors holding “secured” claims - $544,600.
b. Creditors holding “priority unsecured claims” - $9,100.
c. Creditors holding “unsecured non-priority claims” - $851,974.
(Note: Chris Charles, sole-shareholder of FR is one of the company’s unsecured non-priority claim holders; his claim is $600,000.)
2. In the “disclosure statement” document, there is another breakdown of “classes” of creditors (in section “Article 3”)
For the purposes of the Plan, the Claims against, or Interests in, the Debtor are grouped in the following Classes in accordance with Section 1122(a) of the Bankruptcy Code:
· Class 1 - Priority Claims. Class 1 consists of all Priority Claims.
· Class 2 - Secured Claim of the Hillsborough County Tax Collector. Class 2 consists of the Secured Claim of the Hillsborough County Tax Collector.
· Class 3 - PNC Bank Secured Claim. Class 3 consists of the Secured Claim of PNC Bank.
· Class 4 - Ally Financial Secured Claim. Class 4 consists of the Secured Claim of Ally Financial.
· Class 5 - Unsecured Claims. Class 5 consists of all General Unsecured Claims.
· Class 6 - Interests in the Debtor. Class 6 consists of all Interests in the Debtor.
Classes 2 through 6 are Impaired by the Plan. The Holders of Claims and Interests in Classes 2 through 6 are entitled to vote to accept or reject the Plan.
3. Here’s a very quick look at the “history of the debtor and factors precipitating the reorganization”, as found in section “Article 2”
The Debtor has operated a document reproduction and management company, with a specific emphasis on the reproduction of blueprints and construction documents, since 1988. In 2009, the Debtor borrowed approximately $658,500.00 from PNC Bank pursuant to an SBA loan in order to finance the purchase of certain equipment and provide sufficient cash flow to the Debtor’s business. To secure the PNC Bank loan, the Debtor granted PNC Bank a security interest in all assets of the Debtor. PNC Bank perfected its security interest by filing UCC-1 financing statements as Document Nos. 200900529650 and 20090121310X with the Florida Secured Transaction Registry on May 14, 2009 and September 17, 2009, respectively. Due to the downturn in the economy, specifically in the construction industry, the Debtor has had a significant decrease in demand for reproduction of construction documents. This immediate need for filing the Chapter 11 case was to forestall an eviction from the previously leased premises, which would have resulted in an inability for the Debtor to operate, and to permit the Debtor to make an orderly move into a newly-leased premises.
4. Here’s a very quick look at how and when Creditors are supposed to be paid under the terms of the Reorganization Plan:
This table does not include the amounts that are owed to the Hillsborough County Tax Collector. That is considered a “secured” claim.
| | | Period / Payments Due | Period / Payments Due | Period / Payments Due |
| | | June 2011 – May 2012 | June 2012 – May 2016 | June 2016 |
| PNC Bank (secured creditor) | Promissory Note for Balance Due, 6% interest on note | $4,000 per month | $5,000 per month | Remaining principal balance and accrued interest due in full - balloon payment |
| Ally Financial (secured creditor) | Original financing agreement to continue | Payments as per the terms of the original financing agreement | Payments as per the terms of the original financing agreement | Payments as per the terms of the original financing agreement |
| General Unsecured Creditors | Payments to be made from “Unsecured Creditor Fund” | No payments due | On the July 1, 2012 and on July 1 thereafter, through 2016, pro-rata share of amount in the “Unsecured Creditor Fund” | On the July 1, 2012 and on July 1 thereafter, through 2016, pro-rata share of amount in the “Unsecured Creditor Fund” |
5. Here’s a very quick look at the “estimated claims” and “estimated recoveries” under the Reorganization Plan:
| | | Period / Payments Due | Period / Payments Due |
| | # of claims | Estimated Total Amount of Allowed Claims | Estimated Recovery |
| Administrative Claims | 3 | $35,000. | 100% |
| Secured Claims | 3 | $642,416. | 100% |
| Unsecured Claims | 30 | $301,493. | 33.2% |
Here are a few of the paragraphs that basically explain that there are no guarantees that the plan will be achieved:
The debtor and its professionals have expended considerable time and effort to ensure the accuracy of the estimated information set forth below; however, no representation can be made that such information is without inaccuracy. The information set forth below is subject to the uncertainties of litigation with respect to many claims and interests and other factors, which may or may not be resolved in the debtor’s favor. Therefore, no assurance can be given that the estimated allowed claims and interests are exact or that the estimated recoveries will be achieved.
While the debtor believes that the financial projections are reasonable in light of current facts and circumstances known to the debtor’s management, the financial projections are based on a number of assumptions and are subject to significant uncertainties, which are beyond the control of the reorganized debtor. Therefore, there can be no assurance that these financial projections will be realized and actual operating results may be materially higher or lower than forecast.
Other Alternatives to the Plan. If the Plan is not confirmed, the Debtor or any other party in interest could attempt to formulate a different plan of reorganization. Such a competing plan of reorganization might involve either a reorganization and continuation of the Debtor’s business or an orderly liquidation of its assets.
6. At the end of the “Plan of Reorganization” document, there are “financial projections”, which basically set forth Mr. Charles’ projections of receipts, expenses and payments to creditors. (See document for specifics.) I do have just a few comments about the projections and, in particular, about payments to FR’s unsecured creditors:
First comment: The projections show that Mr. Charles has estimated that “net collections” on sales (after sales taxes) will be $534,000 in year one and somewhat greater than that amount for each of the next four years. In the “operating reports” that were filed for December 2010 and January 2011, “total income” was $38,152 in December 2010 and $29,827 in January 2011. FR’s business is going to need to pick up considerably (over and above what FR reported for Dec and Jan) in order for Mr. Charles’ projections to come true. Given the recession the reprographics industry is still experiencing and the fact that FR relocated its business outside of the downtown Tampa district is that likely to happen?
Second comment: It was stated in the documents that “unsecured non-priority claims” amounted to $851,974. However, later on, it said in the document that “allowed amount” of the 30 unsecured creditor claims is only $301,943. So, it looks like FR’s unsecured creditors, right out of the gate”, are taking a “hit” (a “haircut, if you will) of $550,000. To go further, the financial projections, at the end of the Reorg Plan document, project that five (5) $20,000 annual payments will be made to the unsecured creditors’ fund; that totals up to $100,000 over the 5 year time frame the Plan is to run. $100,000 divided by $301,943 = 33%. So, where the document says that the “estimated recoveries” for unsecured claims are estimated to be 33.2% of the total “allowed” amount, when you compute this math - $100,000 divided by $851,974 = 11.7%, it “looks to me” like FR’s unsecured creditors are looking at getting just under 12% of their “total” claims, and, keep in mind that that will only happen if FR meets the projections that Mr. Charles came up with, which, in my opinion, are very aggressive.
Third comment: Inasmuch as Mr. Charles is the 100% shareholder in FR and the “officer” who will be continuing to operate and manage FR, he will continue to receive a salary from FR. According to the financial projections, his “officer” salary, out of the gate, will be $9,600 per month, but then it will go up to $10,600 per month in December 2011. And, in subsequent “plan” years, it will go up even more. I guess one of the nice things about filing for BK (if you are the debtor in possession) is that, while creditors “get stuck” for a hefty slug of what they are owed, the person who runs the business still continues on with a very nice compensation deal!
Fourth comment: The Reorganization Plan has been filed with the Court, and, at this point, parties who have an interest in the FR Bankruptcy, will be asked to “vote” to approve the plan and there will be a hearing (on May 4th at 10:00 am) at which the Plan will be approved, or not approved, as the case may be. Most plans are approved without any objections from creditors.
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Here are “links” you can click on to access the documents I pulled off of Pacer.gov this morning (please note that larger files take longer times to load, so be patient):
Florida Reprographics Bankruptcy - January 2011 Operating Report:
Florida Reprographics Bankruptcy - Amended Financial Schedules filed Feb 24, 2011
Florida Reprographics Bankruptcy – Reorganization Plan and Disclosure Statement
Florida Reprographics Bankruptcy – Order Conditionally Approving Disclosure Statement (and Reorganization Plan), Fixing Time to File Objections, Setting Hearing for Confirmation of the Plan (hearing set for May 4, 2011)
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