Great Value Storage Chapter 11 bankruptcy dismissed as bad faith case

By Sarah Lizee

Olympia, Wash., June 4 – GVS Portfolio I B, LLC, which does business as Great Value Storage, had its Chapter 11 bankruptcy case dismissed on Friday by the U.S. Bankruptcy Court for the District of Delaware, according to an order.

The case was filed in bad faith, the court said in its order.

As previously reported, secured creditor RREF III Storage LLC had filed a motion seeking the dismissal in late April.

RREF, which says it is the debtor’s only secured creditor, claimed that GVS – a single-asset, special-purpose entity created for the purpose of incurring mezzanine financing – initiated the Chapter 11 case less than one hour before RREF was to conduct a court-ordered uniform commercial code foreclosure auction of the debtor’s sole asset that was pledged to secure about $100 million of debt owed to RREF.

“The debtor’s filing of the Chapter 11 petition for the purpose of triggering an automatic stay is nothing more than a naked attempt to misuse the bankruptcy process,” RREF said in its objection.

RREF said that due to certain unstayed actions that may be taken by creditors at direct and indirect non-debtor subsidiaries that actually own the real properties that form the basis of any value flowing up to the debtor, the filing will irreparably harm RREF.

“The debtor’s Chapter 11 filing – which was not accompanied by any first-day motion or affidavit – is yet another step in a series of failed attempts by the debtor to hinder RREF’s rights through frivolous and dilatory litigation,” RREF said.

The court said Friday that the fact that the case was filed immediately before foreclosure in order to obtain the automatic stay, coupled with the two-party nature of the dispute between the debtor and RREF, supports the finding that the case was filed by the debtor for a tactical advantage against RREF in the New York state court litigation that resulted in a foreclosure sale.

The Austin, Tex.-based storage chain filed bankruptcy on April 12 under Chapter 11 case number 21-10690.

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