A Colony Beach & Tennis Resort settlement and bankruptcy reorganization plan were dismissed by U.S. Bankruptcy Judge K. Rodney May Wednesday in his Tampa courtroom. May chose instead to convert the case to a Chapter 7 liquidation.
Frustrated with a lack of movement on a proposed settlement with Colony unit owner and developer Andy Adams and no money coming forward to settle the issues, May said the case’s time in Chapter 11 reorganization had run its course.
The case spent more than a year in May’s hands. Many Chapter 11 cases take three months to settle.
“The justifications are plentiful, but insufficient to overcome approval of a settlement,” May said.
As part of his ruling, May will also allow Colony Lender LLC — the case’s largest affected creditor — to hold an auction of its assets in Sarasota at a date yet to be determined.
The proposed settlement was between longtime Colony owner Dr. Murray “Murf” Klauber, the Colony Beach & Tennis Resort Association and other Colony parties and creditors.
That settlement would have given $3 million to Klauber through a consulting agreement and distribute $2.3 million to a U.S. bankruptcy Chapter 7 trustee to pay creditors.
The settlement also would have absolved the association of a $25 million judgment for damages Klauber won in a bankruptcy appeals court in 2012.
“We don’t believe the judge’s decision today was in the best interest of the majority of the Colony’s creditors, the unit owners and certainly our family, as well as the town of Longboat Key,” said longtime Colony General Manager Katie Klauber Moulton. “Our attorneys have discussed several other alternatives and options we can pursue though over the next few weeks that may lessen the impact and be more positive and productive for all of the parties.”
May made it known he was frustrated with the lack of one settlement party.
Adams, who owns approximately 60 units at the Colony, still hadn’t signed the settlement Wednesday, even though May was told in January signatures from Adams and his Breakpointe LLC entity were forthcoming.
“Unless I missed something, they still haven’t signed it,” May said.
Adams couldn’t be reached for comment Wednesday.
Adams’ signature, though, was not the only reason May rejected the settlement.
Colony Lender LLC, which is owed $14 million from past due Klauber bank loans it purchased, opposed the settlement because it wasn’t included.
May said he had issues with money being distributed to Klauber while no money was offered to Colony Lender.
“I can’t approve this,” May said. “So everything else is dead on arrival without (bankruptcy) confirmation.”
May asked the attorneys of Colony Lender and the association to make their case as to whether he should convert the case to Chapter 7 or not.
Association attorney Jeff Warren asked for two more weeks.
“There could be an amended plan,” Warren said. “There’s no harm in giving us more time.”
The comments made Colony Lender attorney Michael Assaf rise to the podium.
“This is the third plan filed and denied confirmation,” Assaf said. “To ask for more time to shock the dead
body is ridiculous. There’s no life left for these debtors in Chapter 11. It’s time to pull the sheet over it.”
May quickly decided to convert the case to Chapter 7 after the arguments were made.
“I think I have signaled the importance of someone bringing in some money to resolve these issues,” May said. “And here we sit today with settlement parts askew. I’m converting the case.”
Colony Lender principal David Siegal told the Longboat Observer that May made the right decision and the conversion to Chapter 7 “will make things happen immediately.”
“Now that the court has gotten out of the way, you will see developers come in with checkbooks and resolve the issues and buy us all out,” Siegal said.
One of those developers, Siegal said, is Orlando-based Unicorp National Development Inc. managing member Charles Whittall.
“Whittall is just one of the developers that have been waiting for this decision so they can move forward and buy us and other parties out,” Siegal said.
Colony Beach & Tennis Resort Association President Jay Yablon said “today’s court ruling means that we will get to a redevelopment along a different road than the one we had planned, but we will still get there.”
“It remains the association’s goal to have the Colony property redeveloped as a world class resort of which the owners and our Longboat neighbors can be proud, and to get the legal contests and impediments behind everyone,” Yablon said. “But as anyone with life experience knows, there always is more than one route to any goal, and more often than not, the way you get there is not the way you expected.”
Mayor Jim Brown, who attended the hearing, called the decision “a little shocking,” but “maybe a good thing if it forces everyone to put the whole property on the market and buy everyone out.”
“Somebody has to come forward now,” Brown said. “If somebody has a plan, maybe this is they opportunity they need to put it on the table and make a deal.”
Pick up a copy of next week’s Longboat Observer for a comprehensive look at May’s ruling and what a Chapter 7 liquidation means for all Colony parties involved.
Contact Kurt Schultheis at [email protected].