(Jan. 16):  Stutman, Treister & Glatt, P.C., along with Shea & Carlyon Ltd., represents the Official Committee of Equity Security Holders of USA Capital First Trust Deed Fund, LLC (the "FTDF Committee") in the USA Capital bankruptcy cases currently pending in the United States Bankruptcy Court for the District of Nevada.

 

The Debtors in the USA Capital bankruptcy cases have advised the FTDF Committee that Sierra Liquidity Fund, LLC ("Sierra Liquidity") has offered to purchase membership interests in USA Capital First Trust Deed Fund, LLC (the "FTDF") at approximately 35 cents on the dollar. [1]  Sierra Liquidity's business is to purchase claims in bankruptcy at a discount. The Debtors and the FTDF Committee are concerned that FTDF members may sell their interests to Sierra Liquidity at a deep discount without understanding the anticipated recovery to FTDF members under the recently confirmed Chapter 11 Plan in the Debtors' cases.

 

As you may be aware, on December 20, 2006, the Bankruptcy Court confirmed the Debtors' Third Amended Joint Chapter 11 Plan of Reorganization (the "Plan").  The order confirming the Plan was entered by the Court on January 8, 2007.  The Plan approves a sale of the FTDF loan portfolio (as well as certain assets of USA Commercial Mortgage Company) to a third party buyer (the "Sale").

 

The Debtors believe that the recoveries to FTDF members from the Sale will be a minimum of 67% to 70% of their investment. (See, Debtors' First Amended Disclosure Statement for Debtors' Third Amended Joint Plan of Reorganization, at page 7.)  This 67% to 70% recovery estimate was provided based on the original price for the FTDF loan portfolio, and prior to the auction of such assets that took place on December 7, 2006.  At the auction, there was significant overbidding, which will result in recoveries to FTDF members higher than the initial 67% to 70% estimate.  The Sale has not yet closed, but is anticipated to close before February 16, 2007. 

 

Although neither the Debtors nor the FTDF Committee can guarantee that the Sale will close, there is a strong likelihood that it will close prior to February 16, 2007.  In the event it does close, shortly thereafter (and most likely some time in March 2007), FTDF members will likely receive an estimated recovery greater than 67% to 70% of their investment.  This anticipated recovery is significantly more than the approximately 35% being offered by Sierra Liquidity for the FTDF member's interests.  The FTDF Committee is concerned that FTDF members may not understand that the anticipated recovery from the Sale is nearly double the Sierra Liquidity proposal and is likely to occur around the end of March 2007.

 

The FTDF Committee understands that individual FTDF members may have many reasons that compel them to elect to sell their FTDF interest to Sierra Liquidity or any other third party.  The FTDF Committee, however, wants to be sure that FTDF members are fully informed when they make a decision to sell their FTDF interests at this stage.  Most importantly, prior to selling their interests all FTDF members should be aware of the anticipated minimum recovery of 67% to 70% under the Plan and Sale, which will most likely be made to FTDF members by the close of March 2007.

 

 

Contact:  Andrew M. Parlen, Stutman, Treister & Glatt, P.C., (310) 228-5705

 

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[1] Under the FTDF Operating Agreement, transfers of FTDF units and member interests are subject to certain restrictions/requirements, including the approval of the FTDF's manager, USA Realty Advisors, Inc., in its sole discretion.  Compliance with such restrictions is the responsibility of the parties to any particular transfer or assignment.

 

 

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