In re Waterways Barge Partnership, Bankruptcy No. 88-00560-BKC-GEL.
| Decision Date | 05 July 1989 |
| Docket Number | Bankruptcy No. 88-00560-BKC-GEL. |
| Parties | In re WATERWAYS BARGE PARTNERSHIP, Debtor. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Mississippi |
E. Randolph Noble, Jr., Robertshaw, Terney, Noble and Smith, Greenville, Miss., and Simon Aron, Manatt, Phelps, Rothenberg, and Phillips, Los Angeles, Cal., for Waterways Barge Partnership.
John R. Bolton, Asst. Atty. Gen., Robert Q. Whitwell, U.S. Atty., Robert P. Crutcher, Asst. U.S. Atty., John T. Stemplewicz, Dept. of Justice, Washington, D.C., for U.S. on behalf of Maritime Admin. (MARAD) of Dept. of Transp.
On consideration before the Court is the plan of reorganization filed by the debtor, Waterways Barge Partnership; objection to the confirmation of said plan having been filed by United States of America Department of Transportation, Maritime Administration, hereinafter referred to as MARAD; and the Court having heard and considered same hereby finds as follows, to-wit:
I.
The Court has jurisdiction of the subject matter of and the parties to this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(A), (L), and (O).
II.
The plan of reorganization sets forth the following classification of claims and interests:
1. Class I Claims: The allowed claims of administrative creditors and creditors entitled to priority under § 507(a) 11 U.S.C. § 507(a) of the Bankruptcy Code.
2. Class II Claim: The allowed secured claim of MARAD.
3. Class III Claim: The allowed unsecured claim of MARAD.
4. Class IV Claims: The allowed claims of unsecured creditors of the debtor not entitled to priority under § 507 of the Bankruptcy Code, and not included in any other class hereof, including, without limitation, claims which may arise out of the rejection of any executory contracts.
5. Class I Interests: The interest of the corporate general partner of the debtor, Waterways Management Corporation, a Mississippi corporation, as well as, the interests of the thirty-three limited partners of the debtor whose names and addresses were set forth on an exhibit appended to the debtor's disclosure statement.
The plan of reorganization has proposed the following treatment for the aforementioned classes of claims and interests:
1. Class I Claims: The debtor asserts that the creditors within this class will receive payment in cash in full on the effective date of the plan and, as such, their claims are unimpaired by the plan. It would appear that the creditors within this class are primarily the attorneys and accountants who are providing post-petition services to the debtor.
2. Class II Claim: To satisfy the allowed secured claim of MARAD, the debtor proposes to pay to MARAD on the effective date of the plan in cash the full value of the collateral, i.e., forty-nine grain hopper barges, currently securing the indebtedness owed to MARAD. In order to raise the funds necessary to "cash out" MARAD's allowed secured claim, the debtor proposes to sell the barges free and clear of liens to KRS Corporation, a Mississippi corporation, hereinafter referred to as KRS, at a price per barge to be set by the Court. Although the value of these barges is a disputed issue, the debtor has indicated in its plan that the value ranges from $160,000.00 per barge (total value $7,840,000.00) to $165,000.00 per barge (total value $8,085,000.00).
The aforementioned proposal presumes that MARAD would not elect to have its claim treated as fully secured pursuant to 11 U.S.C. § 1111(b)(2). Although this Court is of the opinion that MARAD could well have availed itself of this election, it did not do so; therefore, the aforesaid proposal has become material insofar as the confirmation of the debtor's plan is concerned.
According to the debtor's disclosure statement, the debt owed to MARAD is designated as follows:
OUTSTANDING AMOUNT
OBLIGATIONS AS OF 3/18/88
Title XI payoff (secured
by ship mortgage on 49
barges) $11,320,459.25
MARAD advance of
$1,000,000.00 on 4/14/82
plus accrued interest 1,980,075.60
Guarantee fee 103,683.09
______________
TOTAL DUE MARAD $13,404,217.94
The aforementioned amount is disputed by MARAD which claims that it is owed the total sum of $14,030,000.00.
3. Class III Claim: This class contains the unsecured claim of MARAD, i.e., the deficiency claim exceeding the amount of the allowed secured claim specified in Class II hereinabove. The debtor proposes to pay this claim as follows:
(a) A payment of $245,000.00 on the effective date of the plan which represents additional proceeds received from the sale of the barges to KRS.
(b) A payment of approximately $245,000.00 within sixty days after the effective date of the plan which is to be received from the proceeds of the sale of the barges to KRS or from a combination of the proceeds of said sale plus revenues generated by the barges during the pendency of the bankruptcy case. Although the Class I administrative expense claims are to be paid additionally from this fund, as well as, those Class IV creditors who elect to receive fifty percent of their allowed unsecured claims, the debtor indicates that KRS will cover any "short fall" so that MARAD will be insured of receiving this second $245,000.00 payment.
(c) A payment to be made directly from Robert B. Miller and Associates, Inc., hereinafter referred to as Miller and Associates, in the amount of approximately $629,627.83, which represents that portion of the post-petition earnings generated by the barges and payable to MARAD pursuant to the previous orders of this Court.
(d) The balance of payments to MARAD is to be made from revenues generated by the barges over a seventeen year period, less the repayment of the KRS investment plus a ten percent return on the investment. It appears that the repayment of the principal investment of KRS is to occur over the first twelve years of the plan. However, the language set forth in the plan is unclear as to the mechanics of this repayment.
Robert B. Miller of Miller and Associates estimated that the charter rate for the barges would amount to $85.00 to $90.00 per day per barge. The debtor estimated that the revenues needed to repay the KRS investment plus the ten percent interest charge would be in the range of $72.00 to $85.00 per day per barge. (See page 5, debtor's ex-parte application to make non-material modification to plan of reorganization, etc.) At the confirmation hearing, Allen Mott, the president of the debtor's corporate general partner, revised the KRS repayment figure to the sum of $82.00 to $83.00 per day per barge. The difference in the charter rate and the investment repayment rate would be paid over to MARAD by the debtor's corporate general partner which is to serve as the disbursing agent for purposes of consummating the plan. During the last five years of the seventeen year proposal, presumably following the repayment of the initial KRS investment, KRS is to deliver all excess revenues above its ten percent return on investment to the disbursing agent for payment to MARAD. The debtor estimates that the payments to KRS during this last five year period will be in the range of $45.00 to $50.00 per day per barge. (See page 5, debtor's ex-parte application to make non-material modification to plan of reorganization, etc.) As mentioned earlier, this part of the debtor's proposal is confusing, particularly if KRS is to be fully repaid with ten percent interest during the first twelve years after confirmation.
Although the amount is vigorously disputed by MARAD, Exhibit B to the debtor's post-confirmation trial brief reflects the amortization of the balance of MARAD's unsecured claim in the sum of $4,929,968.99. The amortization indicates a payment to MARAD at the rate of $13.00 per day per barge for the first twelve years after confirmation and at the rate of $35.00 per day per barge for the remaining five years. This is a straight amortization of the unsecured deficiency with no interest being added as compensation for the payments being made in deferred installments. The likelihood of these payments being actually made in the amounts projected seems extremely doubtful to the Court.
4. Class IV Claims: According to the debtor's disclosure statement, this class contains the claims of three unsecured pre-petition creditors, to-wit:
Claim of Robertshaw, Terney
Noble and Smith for pre-petition
legal services (This law
firm continues to represent the
debtor post-petition.) $10,000.00
Claim of Chapman, Emerson
and Company for pre-petition
accounting services 3,000.00
Claim of Continental Illinois
National Bank and Trust Company
of Chicago, Corporate
Trust Department, for pre-petition
professional trust administration
services 2,241.69
__________
Total $15,241.69
In satisfaction of the aforementioned three claims, the debtor proposes to pay either fifty percent of the allowed amount of each claim in cash on the effective date of the plan, or at the option of the holder, to pay deferred payments equal to one hundred percent of the...
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