87 Jacobus Ave: Town of Kearny files Chapter 11 plan for debtor

By Sarah Lizee

Olympia, Wash., April 25 – The town of Kearny, N.J., filed a Chapter 11 plan of reorganization and disclosure statement for 87 Jacobus Ave LLC with the U.S. Bankruptcy Court for the District of New Jersey on Thursday.

A hearing on the disclosure statement is scheduled for June 4.

Background

As a reminder, the debtor owns about 10.6 acres of undeveloped property in Kearny. It closed on its purchase of the property from an entity known as Farnow Inc. after executing a contract of sale with Farnow in May 2022.

Farnow had owned the property since the 1960s and used it to manufacture varnishes, alkyds and latexes for paint. As a result of environmental contamination, the property has been the subject of extensive environmental cleanup for almost 40 years.

The debtor’s goal in purchasing the property was to address all outstanding real estate tax obligations to the town of Kearny, as well as any obligations to the EPA, the New Jersey Spill Compensation Fund (NJSCF) and the New Jersey Department of Environmental Protection (NJDEP), all in the context of moving forward with the redevelopment of the property.

The debtor said that when it originally entered into its contract with Farnow in May 2022 for the purchase of the property, its efforts to move forward and close the transaction were stalled due to the inability of the EPA and NJDEP to provide necessary information of the amounts required to satisfy their alleged outstanding liens.

The debtor later faced a final tax sale foreclosure judgment by Kearny, prompting the Chapter 11 filing to obtain time to satisfy the tax obligations in full, determine the extent and validity of all encumbrances on the property and enable the debtor to move forward with redevelopment.

Kearny’s plan terms

According to the plan’s disclosure statement, Kearny will have an allowed secured claim in the estimated total of $16.5 million. On the effective date, the automatic stay will be lifted and the town can exercise its rights to its collateral, including continuation of the sale.

In the event enough cash proceeds are received by Kearny from a sale of the property to satisfy the full amount of the claim, the last $50,000 will be paid to holders of general unsecured claims.

The estimated total of general unsecured claims is $950,000. In the event all senior secured claims, administrative claims and priority claims are paid in full, general unsecured claimholders will receive remaining cash proceeds from the foreclosure sale, if any, in addition to the $50,000 carveout above.

The secured claims of the Environmental Protection Agency, the State of New Jersey and the New Jersey Department of Environmental Protection will pass through and be restored as if the Chapter 11 case had not been filed. The automatic stay will be lifted so they may pursue or enforce their rights under non-bankruptcy law. The estimated total class claim is $147.52 million.

Interests will also pass through unimpaired.

The Hudson, N.J.-based company filed bankruptcy on June 7, 2023 under Chapter 11 case number 23-14955.

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