Staying Afloat in Chapter 7
A number of entities in the Ginn corporate group filed for Chapter 7 in Dec’08. These are companies involved in 2 upscale residential and resort community projects – Tesoro in Port St Lucie, Florida, and Quail West in Naples, Florida, where they sell single-family units and condominium units.
Even though Chapter 7 proceedings generally involve fire-sale liquidations, this case seems to be going down the track of a going concern. On the day after the bankruptcy filing, the Trustee requested court approval to operate the businesses in the ordinary course until they could be sold. There were also media reports about the Trustee’s comments that the process would be handled “similar to a Chapter 11 case.”
In court documents relating to cash collateral and post-petition financing, it was stressed that the availability of sufficient working capital was vital to the Trustee’s “ability to preserve and maintain the Debtors’ going concern value and maximize the value of the Debtors’ assets in connection with a sale of those assets”.
Moreover, unlike many home builders which were struggling to get post-petition financing, these Ginn entities finalized financing agreements with existing first lien lenders in Feb’09. As such, our Crash Predictor sways strongly in favor of a section 363 sale.
