GVS Texas: U.S. trustee seeks Chapter 11 trustee or case conversion

By Sarah Lizee

Olympia, Wash., Oct. 13 – The U.S. trustee overseeing GVS Texas Holdings I, LLC’s Chapter 11 bankruptcy case asked the U.S. Bankruptcy Court for the Northern District of Texas to appoint a Chapter 11 trustee or convert the case to Chapter 7, according to a motion filed Tuesday.

Region 6 U.S. trustee William T. Neary said appointment of a Chapter 11 trustee is necessary because the debtors can’t serve as fiduciaries, as reflected by the incomplete financial reporting, as well as the attendant litigation and “lack of confidence” that resulted.

Great Value Storage LLC, a non-debtor operating affiliate that maintains, manages and operates the debtors’ self-storage and parking facilities, was placed into receivership by a Texas state court on Sept. 8. On Oct. 6, a Texas court of appeals signed an order temporarily staying the receivership order.

“The basis for appointing the receiver was failing to produce financial discovery to the same creditors involved in this case,” Neary said in his motion.

“Given debtors’ corporate governance structure and the fact that the property manager is in receivership, the appointment of a Chapter 11 trustee would be the most effective and efficient way to pursue reorganization and is in the best interests of the creditors and the estate.”

The property manager is indirectly owned and controlled by Natin Paul, who also directly or indirectly owns the debtors as the principal shareholder of the debtors’ corporate parent GVS Portfolio I C, LLC, a debtor in the Chapter 11 cases.

Paul, who sits on the board of the debtors and ultimately controls the decision-making process for the estates, is under federal investigation.

“Paul’s attention, at a minimum, is distracted from acting as a fiduciary, while dealing with a myriad of additional lawsuits, including the 25 bankruptcy cases filed in the Western District of Texas,” the U.S. trustee said.

The U.S. trustee also said cause exists to appoint a Chapter 11 trustee based on the debtors historical and ongoing inability to comply with administrative issues in these cases.

Neary said the debtors have failed to provide sufficient proofs of insurance for over three months, set up appropriate debtor-in-possession bank accounts for nearly three months, and have yet to make requested amendments to their monthly operating reports.

“While these non-compliance issues are technical, they bolster the underlying concern throughout the related proceedings: the cases lack financial transparency, and that lack of transparency leads to concerns about the fiduciaries,” the U.S. trustee said.

GVS Texas is an indirect subsidiary of GVS Portfolio I B, LLC, which does business as Great Value Storage, an Austin, Tex.-based storage chain. GVS Texas Holdings I filed bankruptcy on June 17 under Chapter 11 case number 21-31121.

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