Terra Nostra noteholders seeks appointment of Chapter 11 trustee, limitation on asset transfers

By Caroline Salls

Pittsburgh, Dec. 10 - Terra Nostra Resources Corp.'s informal noteholders committee has asked the U.S. Bankruptcy Court for the Southern District of New York to limit the company's ability to transfer assets without court approval, as well as to appoint a Chapter 11 trustee to oversee Terra Nostra's bankruptcy case, according to a Wednesday court filing.

According to the motion, the noteholders have learned over the past four months that Terra Nostra's former chairman and chief executive officer, Sun Liu James Po, who was also the chairman of the company's China joint ventures, "was involved in self-dealing transactions in the name of the debtor that were either not disclosed to or misrepresented to the remaining board members and otherwise not in the best interests of the debtor or its creditors."

In addition, the committee said Terra Nostra's senior officers and two out of five board members resigned and were not replaced, the company did not maintain directors' and officers' liability insurance and was generally not paying its debts as they became due; and the company's remaining two board members were reluctant to perform their duties as officers and board members or to remove Po from his position because of the lack of insurance.

The committee said the board members were unaware of the dealings between Po and the joint venture partner in China, were unaware of the financial situation of the China joint ventures and were unaware that the operations of the casting and smelting facilities in China were halted due to an alleged lack of funds.

"Because of this apparent inability or unwillingness of the remaining directors, the petitioning noteholders reluctantly commenced this action to try to maximize the value of the debtor's assets and satisfy their claims," the committee said in the motion.

If the court chooses not to appoint a Chapter 11 trustee to "fill the void left by the departed executives," the committee is asking it to instead terminate the company's exclusivity so the noteholders can propose a plan that will provide creditors with a recovery.

Los Angeles-based Terra Nostra is a copper and stainless steel producer in China. A group of noteholders filed an involuntary Chapter 11 case against in on Nov. 25. Its Chapter 11 case number is 08-14708.

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