Klausner Lumber Two seeks four-month extension of exclusive periods

By Sarah Lizee

Olympia, Wash., Oct. 7 – Klausner Lumber Two, LLC is seeking a four-month extension of its exclusive periods to file and solicit votes on a Chapter 11 plan, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

The company is seeking to extend the plan filing period through Feb. 8 from Oct. 8 and the solicitation period through April 7, 2021 from Dec. 7.

Both before and after the petition date, the debtor and Halifax County, N.C., engaged in discussions regarding a settlement of the disputes between the debtor and the county to enable the debtor to sell certain property along with the rest of its assets, as part of a value maximizing going-concern sale. On July 28, the debtor filed a motion with the court seeking approval of a settlement agreement.

On Aug. 14, prepetition lender Carolina Sawmill, LP objected to the settlement on numerous grounds, including that the settlement was an improper settlement of a three-party dispute among the debtor, Carolina Sawmills and the county over the parties’ respective rights in the property and that Carolina Sawmills has a lien on the property under a deed of trust.

Klausner said that following an all-day mediation session on Sept. 9, the debtor, Carolina Sawmill, the county and the creditors committee reached an agreement, in principal, which would allow a settlement between the county and the debtor to be approved and the debtor to proceed with selling its assets as a going-concern.

However, some issues regarding the structure of the settlement in light of the EB5 Immigrant Investor Program have arisen, and documentation of the settlement negotiations is at an impasse, Klausner said.

As a result, Klausner said that while it will continue to work in good faith with the parties toward a settlement, it will simultaneously pursue an expedited determination of Carolina Sawmills’ lien issues in the context of an adversary proceeding before the court, which Klausner believes will result in a determination that Carolina Sawmills has no interests, liens or security interests in the property or any of the debtor’s personal property assets, and will enable the debtor to move forward with a going-concern sale.

Klausner Lumber Two is an Enfield, N.C., sawmill and lumber company. The company filed bankruptcy on June 10 under Chapter 11 case number 20-11518.

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