Meruelo Maddux committee asks court to halt company plan solicitation

By Caroline Salls

Pittsburgh, Sept. 15 - Meruelo Maddux Properties, Inc.'s official committee of unsecured creditors is seeking a court order barring solicitation of the company's plan of reorganization amid what it calls "egregious behavior" by Meruelo Maddux, according to a Tuesday filing with the U.S. Bankruptcy Court for the Central District of California.

The unsecured creditors are asking the court to aid confirmation of the competing plan filed by East West Bank and Legendary Investors Group No. 1, LLC.

The committee said the company issued a press release on Sept. 9 entitled "East West Bank Hostile Takeover Plan of Meruelo Maddux Properties Rebuffed by Bankruptcy Court."

According to the committee's motion, East West Bank is not involved in a hostile takeover of Meruelo Maddux, and nothing has been rebuffed by the court.

In addition, the committee said the company claims in the release that is plan has been approved, so there is "no need to proceed with a half-baked plan that attempts to take MMPI over."

The committee said Meruelo Maddux's plan has not been approved, and this statement could have a significant negative impact on plan voting.

The creditor group said the press release constitutes an "improper solicitation" because it was issued days before the Sept. 17 distribution of solicitation packages for voting on the company's plan so the release information would be fresh.

The committee said the release was also issued before the company's disclosure statement was approved, "making it difficult to allow a fair solicitation process for competing plans."

As a result, the committee is asking the court to prohibit distribution of the company's disclosure statement and the solicitation of votes on the plan, order Meruelo Maddux to retract the press release and release a correction or rebuttal and keep the company from issuing similar press releases and having similar communications with creditors and shareholders without court approval.

"The press release is another example of highly questionable or illegal conduct by the Chapter 11 debtors and their management in these cases," the committee said in the motion.

"The dissemination of the press release was beyond an improper solicitation intended to taint the voter pool in favor of the debtors' plan and shifting blame to EWBC for delays in the debtor's Chapter 11 plan of reorganization."

"Enough is enough. The debtors have eliminated whatever credibility they had remaining.

"Their ability, through the management-sponsored plan of reorganization, to propose and confirm their plan is not a right, but rather it is a privilege," the committee added.

Meruelo Maddux, a self-managed, full-service real estate company that develops, redevelops and owns commercial and multi-family residential properties, filed for bankruptcy on March 26, 2009. Its Chapter 11 case number is 09-13356.

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