Security National, bank to delay valuation, confirmation hearings

By Jim Witters

Wilmington, Del., Feb. 19 - Security National Properties Funding III, LLC and lender Bank of America, NA have agreed to postpone until March 18-22 the debtors' hearings for valuation and for confirmation of the third amended joint Chapter 11 plan of reorganization, according to a Feb. 19 filing with the U.S. Bankruptcy Court for the District of Delaware.

The hearing had been scheduled to begin on Feb. 20.

In connection with the delay, the voting deadline for Bank of America and the senior lenders is extended to 4 p.m. ET on March 4.

Valuations in question

Bank of America holds liens on some of the debtors' properties with current values totaling $171.5 million, according to the court filing.

Under the stipulation:

• The debtors and the bank reserve their rights as to the appropriate release price for each property under the terms of the new senior debt;

• The debtors and the bank reserve their rights as to the amount by which the new loan amount must be credited if Sequoia Investments V, LLC and Security National Properties Funding, LLC convey to Bank of America or its designee, by deed-in-lieu of foreclosure, the Orchards Mall and Soup Lots under the terms of the plan; and

• Unless otherwise ordered by the court, the debtors and the bank reserve the right to withdraw the stipulations regarding the properties - unless the court already has entered an order confirming the plan or denying confirmation of the plan by the time of any such withdrawal - on or after April 22.

Exclusivity

The debtors' exclusivity motion is deemed modified to seek an extension of the exclusive period for filing a plan through and including March 22.

The debtors' exclusive period to solicit acceptances of a plan is extended until 60 days after March 22.

The bank's exclusivity objection is deemed to be an objection to the exclusivity motion as modified by the stipulation.

Cash collateral

Bank of America and the senior lenders consented to the debtors' use of cash collateral through March 22 on substantially the same terms that they have been consenting to use of cash collateral in prior interim cash collateral orders entered by the court.

The plan

As previously reported, the third amended joint Chapter 11 plan included a new $164.34 million loan from Bank of America.

Additionally, as part of the plan sponsors' new investment, the sponsors may provide the company with additional liquidity, possibly including a $5 million sub-debt facility.

The plan calls for a new money investment from one of the company's current equityholders or an entity formed by the equityholders.

The investment will include:

• Forgiveness of any then-outstanding debtor-in-possession facility balance;

• A cash infusion equal to $3.7 million less the forgiven balance of the DIP facility to be used exclusively for tenant improvements, capital expenditures and necessary periodic payments to holders of specified claims;

• Guaranty of new senior debt to be issued under the plan; and

• A requirement that the plan sponsor provides the company with management services at rates of $300,000 a month for 2013 and $250,000 a month beginning in 2014; and

• Subordination of affiliate claims.

In exchange for its investment, the sponsor or its designee will receive equity interests in the reorganized Security National debtors.

Creditor treatment

Treatment of creditors under the proposed plan remains unchanged and would include the following:

• Holders of administrative claims, priority tax claims, unsecured priority claims, cure claims and secured claims of governmental units will be paid in full in cash;

• Holders of other secured claims will either have their claims reinstated or receive cash or the collateral securing the claims;

• Holders of general unsecured claims will be paid the full amount of their claims in six equal distributions to be made on an initial distribution date and following quarterly distribution dates; and

• Holders of equity interests will retain their interests, but those interests will be diluted by the issuance of equity interests in the reorganized company to the plan sponsor or its designee.

Security National Properties Funding III is a Baton Rouge, La., affiliate of real estate investment company Security National Master Holding Co. It filed for bankruptcy on Oct. 13, 2011 under Chapter 11 case number 11-13277.

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