In re Coco Beach Golf & Country Club Se
| Decision Date | 27 March 2020 |
| Docket Number | CASE NO. 15-05312 (ESL) |
| Parties | IN RE: COCO BEACH GOLF & COUNTRY CLUB SE Debtor |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico |
On March 20, 2020, BANCO POPULAR DE PUERTO RICO ("BPPR"), in its capacity as trustee (the "Trustee") of the "Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority ("AFICA") Tourism Revenue Refunding Bonds, 2011 Series A (Trump International Golf Club Puerto Rico Project)" (the "Bonds") issued pursuant to the Trust Agreement dated March 30, 2011 (the "Trust Agreement"), between BPPR, as Trustee, and AFICA, informing that on January 15, 2020, PUERTO RICO TOURISM DEVELOPMENT FUND ("TDF") sent a settlement proposal to BPPR, as trustee of the Bondholders (the "TDF Proposal"). See dkt. #433. On January 29, 2020, BPPR sent Bondholders a Notice and Request for Instructions to Bondholders submitting the TDF Proposal, with a summary of its terms and conditions, and indicating that pursuant to the December 17, 2019 Order the Bondholders have thirty (30) days from the Notice to object to the TDF Proposal. See dkt. #432.
BPPR informs the following response to the TDF Proposal received as of February 28, 2020:
The informative motions filed by BPPR disclose the recent events related to the pending controversy before the court, that is, whether funds consigned with the Clerk of Court should be disbursed to TDF or BPPR. The same are summarized in the following paragraph.
On December 17, 2019, the court held a status conference on the instant Chapter 11 bankruptcy case (dkt. #426). The Minutes of Status Conference include the following Order: (1) P.R. Tourism Development Fund shall give written notice to Banco Popular de Puerto Rico, as trustee of Bondholders, of its proposal within thirty (30) days. (2) Banco Popular de Puerto Rico shall give notice of the proposal to bondholders fourteen (14) days thereafter, stating that they have thirty (30) days to object to the same. If no timely objection is filed, the proposal will be deemed accepted. (3) Banco Popular de Puerto Rico shall inform the court within twenty-one (21) days thereafter on the results of the bondholders' decision (dkt. #426). On February 13, 2020, the court entered an Order for BPPR and the PUERTO RICO TOURISM DEVELOPMENT FUND ("TDF") to inform within 21 days on their compliance with the Court's Order of December 17, 2019 (Dkt. No. 426). See Docket No. 430.
The recent history described above is relevant but should be placed in perspective with the past events and motions filed concerning the pending contested matter. The court narrates the same below.
On July 14, 2016, BPPR filed a request for payment of administrative fees pursuant to the terms and conditions of the Trust Agreement entered into by and between AFICA and BPPR ("Trust Agreement") and the Loan Agreement entered into by AFICA and Debtor ("Loan Agreement"), both dated March 30, 2011, alleging that the Debtor is liable to BPPR for its reasonable fees and expenses, including counsel fees, in exercising its functions as Trustee. See Section 8.05 of the Trust Agreement and Section 4.05 of the Loan Agreement (dkt. #271). BPPR requests the court allow the recovery of the post-petition administrative expenses accrued by Debtor in this case and order the payment fortto hwith of $45,506.06 to the order of BPPR.
Also, on July 14, 2016, TDF moved the court for the payment of administrative expenses (dkt. #272) alleging that prior to the Petition Date, the Debtor constructed and developed two 18-hole championship golf courses and full-service luxury club facilities located in Río Grande, as well as certain personal and other property (the "Property"), with the proceeds of certain bonds (the "Previous Bonds") issued by the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority ("AFICA") and secured by an irrevocable stand-by letter of credit issued by TDF. The proceeds of the Previous Bonds were lent by AFICAto the Debtor pursuant to a loan agreement where the Debtor agreed to repay the Previous Bonds. See, Proof of Claim No. 22. On March 30, 2011, AFICA issued its Tourism Revenue Refunding Bonds, 2011 Series A (Trump International Golf Club Puerto Rico Project) (the "Bonds") to refund the Previous Bonds. Similar to the Previous Bonds, the Bonds are payable from payments made by the Debtor under a certain Loan Agreement (the "Loan Agreement") between AFICA and the Debtor, and secured by, among other things, an irrevocable stand-by letter of credit (the "Letter of Credit") issued by TDF pursuant to the terms of a Letter of Credit and Reimbursement Agreement (the "Reimbursement Agreement") between TDF and the Debtor. See, Proof of Claim No. 22.
TDF alleges that the Reimbursement Agreement requires the Debtor to, among other obligations, reimburse TDF for any amounts disbursed to Banco Popular de Puerto Rico, as trustee for the benefit of the AFICA Bonds (the "Trustee"), under the Letter of Credit. To secure its obligations to TDF under the Reimbursement Agreement and to the Trustee under the Loan Agreement, the Debtor granted to TDF and the Trustee a first priority lien and security interest over substantially all of its real and personal assets, including the Property, through, among other things: (i) a pledge of mortgage notes (the "Mortgage Notes"), in an amount not less than the principal amount of the Bonds, pursuant to the terms of a Collateral Pledge and Security Agreement (Golf Course) (the "Pledge Agreement"), which Mortgage Notes are secured by a first priority mortgage lien on the real estate portion of the Sale Assets (the "Mortgage"); and (ii) a first priority security interest on, among other things, the personal property portion of the Sale Assets through a Master Security Agreement. The Pledge Agreement sets forth the relative rights and priorities of TDF and the Trustee with respect to the Mortgage and the Mortgage Notes and the proceeds thereof.
TDF concludes that pursuant to the terms of the credit relationship between TDF and the Debtor, as contained and detailed in the Proof of Claim No. 22, TDF disbursed the amount of $1,126,147.52 during the course of the instant bankruptcy proceeding (the "Disbursement"), which Disbursement was made on Debtor's behalf and for the benefit of the bankruptcy estate.
TDF bases its request under Section 503(b) of the Code which states that after notice and a hearing, there shall be allowed, administrative expenses, other than claims allowed under section 502(f) of this title, including the actual, necessary costs and expenses of preserving the estate. 11 U.S.C. § 503(b)(1). In order to establish prima facie showing for an administrative expense under section 503(b)(1)(A) a claimant must make two allegations, that the claim arises from a transaction with the debtor's estate; and that the goods or services provided helped the estate's business tofunction. TDF alleges that it should be entitled to an administrative claim under section 503(b)(1) of the Bankruptcy Code as a result of the Disbursement made on Debtor's behalf during the course of the instant bankruptcy proceedings. TDF prays that an order be entered under section 503(b) of the Bankruptcy Code directing the Debtor to immediately and forthwith pay the total sum of $1,126,147.52.
On September 16, 2016 the Debtor replied to the application for reimbursement of expenses (dkt. #285), stating that TDF's disbursement of its claim for administrative expenses must be in accordance with the provisions in Debtor's Plan of Reorganization and should be disbursed only in conjunction and upon confirmation of Debtor's Plan of Reorganization and within the amounts proposed for distribution under Class 1 of the Plan. The means for execution of Debtor's Plan of Reorganization is based on the proceeds of the sale of the assets of the estate. The proceeds of the sale have been deposited with the Clerk of the Honorable Court and the confirmed balance available for distribution as of May 19, 2016, is $2,123,095.31. The Plan of Reorganization provides that upon confirmation, allowed creditors will receive those particular amounts detailed per each class as these are defined in the Plan. As to Class 1, which accounts for the claims of "TDF" and "BPPR", these creditors will be paid: a)An initial lump sum payment equal to a determined pay-off amount of $1,000,000; b)The turnover of all amounts deposited in Debtor's Reserve Account existing at Banco Popular de Puerto Rico: c)and with a final dividend still to be determined after payment of all carve-out amounts provided and to be approved by the Plan.
On October 20, 2016 BPPR filed a reply to TDF's request for administrative expenses stating that the motion does not submit a breakdown or proof of post-petition disbursements which may constitute actual, necessary costs and expenses of preserving the estate, pursuant to 11 U.S.C. §503(b)(1); the motion fails to address and clarify the issue argued by the AFICA Bondholders at the hearing on approval of the Disclosure Statement that the AFICA Bondholders are secured creditors under Claim No. 22 in the amount of $23,125,000.00; the court does not have jurisdiction to adjudicate the creditors' rights under the Pledge Agreement involving the...
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