7677 East Berry committee asks court to appoint Chapter 11 trustee

By Caroline Salls

Pittsburgh, Oct. 5 - 7677 East Berry Avenue Associates, LP's official committee of unsecured creditors has asked the U.S. Bankruptcy Court for the District of Colorado to appoint a Chapter 11 trustee to oversee the company's bankruptcy case in light of a default on its debtor-in-possession facility, according to a Monday court filing.

As previously reported, 7677 East Berry DIP lender Hypo Real Estate Capital Corp. has requested relief from the automatic say imposed by the bankruptcy filing in connection with the default.

Once the relief is granted, the committee said the lender will most likely take control of the company's property as it proceeds with foreclosure and appointment of a receiver.

In addition, the committee said 7677 East Berry seems to have abandoned all efforts to seek confirmation of a plan of liquidation.

"The prior hearing on the adequacy of the debtor's disclosure statement was vacated, and the debtor is making no effort to proceed with a new plan, nor to move this case along to any conclusion whatsoever," the committee said in the motion.

The committee said its investigation of numerous transfers made by the company has led it to believe that 7677 East Berry "has been less than completely candid with creditors in the schedules and statement of affairs."

"Cause exists for appointment of a trustee in this case in connection with Hypo's obtaining relief from the automatic stay," the committee said in the motion.

"This cause includes dishonesty and incompetence, gross mismanagement of the affairs of the debtor by current management prior to commencement of the case and significant conflicts of interest held by the debtor acting through its manager, [Zachary] Davidson."

The committee also said it now appears that the company was insolvent when it filed for bankruptcy, leaving the possibility of preference actions that could be filed against current counsel.

According to the motion, the committee plans to file its own liquidating plan that would transfer avoidance actions to a liquidating trust for the benefit of creditors.

7677 East Berry, Everest Holdings, LLC and EDC Denver I, LLC are the owners of the Landmark Residential Condominium tower in Denver. The companies filed for bankruptcy on Aug. 28, 2009. The Chapter 11 case number is 09-28000.

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