Kirk disclosure statement approved; plan hearing postponed to Sept. 17

By Alice Popovici

New York, Sept. 2 - Kirk Corp.'s disclosure statement for its plan of reorganization was approved by the U.S. Bankruptcy Court for the Northern District of Illinois, according to a Wednesday filing.

The plan confirmation hearing, originally scheduled for Wednesday, was postponed to Sept. 17.

As previously reported, under the plan the company's chief executive officer and president, John Carroll, will be a member and investor in a new limited liability company that will purchase at least $500,000 of new equity in the reorganized company and provide at least $500,000 in additional subordinated debt.

In addition, Cole Taylor Bank will provide $3.5 million in construction financing to fund the construction of new homes that will be sold beginning in the first quarter of 2010.

The plan also calls for the liquidation of the company's remaining assets, with proceeds to be distributed to Kirk's creditors.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, priority severance claims, and mechanics lien claims will be paid in full in cash;

• Holders of lender secured claims will receive a $7.81 million new secured note, a new note secured by the company's new mortgage, a cash collateral note secured by a replacement mortgage, relief from their obligation to pay $3.2 million to Kirk for the purchase of its Freeman Road property, retention of their office property mortgage, all excess cash available based on a settlement election, additional funds from a post-confirmation net proceeds escrow under inventory transition procedures.

The lenders can also elect to either settle an adversary proceeding against them or allow the reorganized company to proceed with the lawsuit. If the lenders choose to allow the lawsuit to move forward, half of the proceeds will be used to fund general unsecured claim proceeds and a make-up distribution to some general unsecured creditors;

• Holders of real estate property tax claims will be paid in full in cash, plus 2% interest;

• Holders of unsecured ESOP note claims will have a choice to receive either general unsecured claim proceeds or a share of new equity;

• Holders of secured ESOP note claims will be paid in full from the proceeds of a standby letter of credit;

• Holders of general unsecured claims will receive a share of general unsecured claim proceeds, and holders of specified general unsecured claims will receive a share of a make-up distribution;

• Holders of intercompany claims will receive no distribution;

• Holders of indemnification claims will receive either a share of general unsecured claim proceeds or can elect to enter into a new contract with the reorganized company that waives any right to the proceeds; and

• Interest holders will receive no distribution.

Kirk, an employee-owned homebuilder based in Streamwood, Ill., filed for bankruptcy on May 12. Its Chapter 11 case number is 0917236.

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