American Business lender's disbursement ruling reconsideration request denied

By Caroline Salls

Pittsburgh, July 1 - American Business Financial Services, Inc. lender Greenwich Capital Financial Products, Inc.'s motion for reconsideration of an April 10 disbursement ruling was denied Monday by the U.S. Bankruptcy Court for the District of Delaware.

Although she denied the reconsideration motion, judge Mary F. Walrath did clarify that nothing in the disbursement motion denial order was intended to set a cap or maximum on Greenwich's secured indemnity claim under American Business' debtor-in-possession loan agreement.

In addition, Walrath said her April ruling was limited to the use of funds received by American Business originating from ABFS 2003-2, Inc. and it did not apply to the Chapter 7 trustee's use of any other funds.

As previously reported, Chapter 7 trustee George Miller's request for court approval to use funds of ABFS 2003-2 Inc. to make payments owed by ABFS 2003-2 Inc. to the company as the originator under a loan purchase agreement was denied on April 10.

Miller was also seeking court approval to dispose of funds by paying an alleged Greenwich secured claim under American Business' final DIP financing order and to pay on secured claims held by the company's estates as assignee of a Patriot deferred payoff secured claim under the final DIP financing order.

Finally, the trustee asked the court to allow the company's estates to use payments received on the Patriot deferred payoff secured claim and a Clearwing deferred payoff secured claim to pay Chapter 7 administrative claims.

In her disbursement order, Walrath said the company's books and records are not enough to prove anything is owed to the loan origination subsidiaries.

Walrath said the book entry could represent anything, including the cost of services provided to ABFS 2003-2 by the company, and the book entry in question does not even match the amount Miller claims is due under the purchase agreement.

In addition, Walrath said "the trustee's assumption that 100% of the funds raised by the loan trust were to flow through ABFS 2003-2 to the loan originating subsidiaries without reduction for any expenses is illogical and not supported by any of the documents."

According to the ruling, the bill of sale is the best evidence of the loan sale purchase price. Based on the bill of sale submitted to the court, Walrath said there is no evidence that ABFS 2003-2 owes anything more under the loan sale.

Philadelphia-based American Business Financial Services originates, sells and services home equity loans and money mortgage loans. It filed for Chapter 11 bankruptcy on Jan. 21, 2005. The case was converted to a Chapter 7 bankruptcy on May 17, 2005. The company's case number is 05-10203.

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