Creditors, trustee tighten squeeze on USA Springs
USA Springs’ creditors and the U.S. bankruptcy trustee are running out of patience with the controversial company’s attempt to reorganize under Chapter 11 bankruptcy law.
The Official Committee of Unsecured Creditors said in December that it wanted to sell off the company’s assets, and on Jan. 20, the trustee’s office said it wanted the court to dismiss the case altogether, or at least convert it to a Chapter 7 liquidation.
USA Springs, which has been trying for years to construct a water bottling plant in Nottingham despite the fierce opposition of neighbors and town officials, filed for Chapter 11 bankruptcy protection last June in order to gain time to rework its financing.
At that time, the company said it owed more than $13.9 million, with only a few hundred dollars in its checking account. However it claimed its business and real estate were worth $127 million, and it could use those assets to get financing.
At the end of July, USA Springs owner Francesco Rotondo pleaded with sympathetic creditors, saying that the company was ready to close a deal with willing lenders in the next month or so. “I’m going to build this company, no matter what,” he said.
At the end of October, the company filed a reorganization plan that would allow it to continue constructing the half-finished bottling plant and pay off creditors by July 2011.
But USA Springs held off filing the required disclosures about the plan until financing was in place, blaming the poor economy for the delay. On Dec. 19, the creditors asked the bankruptcy court to sell all of USA Springs’ assets, primarily 168.64 acres of land.
However, Roswell Commercial Mortgage LLC, which holds at least a $9 million first mortgage, and the town of Nottingham, which holds at least a $10,000 tax lien, both objected, saying the asset sale motion didn’t make it clear that secured creditors get paid before anyone else.
USA Springs quickly filed a motion two days before Christmas, again blaming the financial crisis, as well as the holiday season, for the financing delay.
The company asked to again extend the deadline for filing its disclosure statement, this time until Jan. 18.
But after no filing came forth, the trustee’s office stepped in, asking to either remove bankruptcy protection – allowing a lienholder to foreclose on the property – or convert the filing to Chapter 7, which would set up a process to liquidate the company’s assets.
“The Debtor has no current ability to make debt service payments or real estate tax payments and on information and belief the Debtor has made none since the filing,” said the trustee’s office in its filing. “Without financing in place the Debtor’s Plan as proposed is not feasible,” adding that the failure to pay debt service and fees “lacks a reasonable likelihood of rehabilitating its affairs.”
A hearing on the trustee’s motion was scheduled for 11 a.m. Feb. 18 at the bankruptcy court in Manchester. Another hearing on the all asset sale was scheduled for April 1.