Legacy Cares committee objects to motion for Chapter 11 trustee

By Sarah Lizee

Olympia, Wash., July 21 – Legacy Cares, Inc.’s official committee of unsecured creditors objected Thursday to a motion from the U.S. trustee that seeks appointment of a Chapter 11 trustee to the case or dismissing the case in the alternative, according to documents filed with the U.S. Bankruptcy Court for the District of Arizona.

The committee said appointing a Chapter 11 trustee or dismissing the case would harm the interests of creditors, especially now that the sale of the debtor’s sports park is approaching critical milestones in the next few weeks.

Appointing a trustee would substantially increase costs, increase uncertainty, distract the debtor and the committee from the sale process, and potentially cause a material delay in these proceedings, the group said.

As previously reported, Region 20 U.S. trustee Ilene J. Lashinsky said there is evidence of dishonesty, incompetence or gross mismanagement of the affairs of the debtor by prepetition management before the start of the case, and evidence of incompetence or gross mismanagement by current management after the start of the case.

Legacy Cares, a non-profit entity whose mission was to create a youth sports facility, obtained financing for the project through the issuance of tax-exempt bonds by the Arizona Industrial Development Authority (Azida) in August 2020. The borrowing was memorialized in a loan agreement between the parties.

The initial issuance raised more than $250 million in funds that were loaned by Azida to the debtor for the project. Another $33 million was raised in June 2021.

The loan agreement contains specific instructions on how the proceeds were to be used in connection with the project.

Lashinsky said the debtor’s tax returns and financial statements show that Legacy Cares made millions of dollars of loans and advances to or on behalf of project manager Legacy Sports USA, LLC during the 28-month period following an initial bond issuance.

Neither the loan agreement nor the offering memo authorized or contemplated the use of any bond proceeds to provide loans to insiders or third parties.

The U.S. trustee said, among other things, this unauthorized use of the debtor’s assets is well-established ground for the appointment of a Chapter 11 trustee.

Legacy Cares is a non-profit corporation that owns Legacy Park, formerly known as Bell Bank Park, a 320-acre sports and entertainment complex in Mesa, Ariz. The company filed bankruptcy on May 1 under Chapter 11 case number 23-02832.

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