Convention center bankruptcy could conclude next week
SOUTH LAKE TAHOE, Calif. – Bankruptcy proceedings surrounding the stalled convention center and condominium project at the state line could be dismissed next week, but legal proceedings against one of the project’s developers are still moving forward.
On April 5, a federal bankruptcy court judge will consider whether to dismiss Lake Tahoe Development Company’s Chapter 11 case or convert the case to Chapter 7 liquidation proceedings.
The development company filed for bankruptcy in October 2009 after being unable to secure funding for the $420 million Chateau at Heavenly Village project, which included condominiums and retail space adjacent to a convention center across U.S. Highway 50 from Heavenly Village.
The possible dismissal of the bankruptcy case follows foreclosure proceedings on many of the 29 parcels composing the project site. Foreclosures began in December after a federal judge began lifting orders preventing such action.
The judge’s orders and foreclosures “simply transformed liens on part of a project into ownership in part of a project,” said Daniel Egan, an attorney for Lake Tahoe Development Company in a federal court filing Friday.
“No creditor or other party, other than the debtor, owns the entitlements or all of the property necessary to complete the project as currently designed,” Egan added.
The development company opposes any move to dismiss or convert the case to Chapter 7, Egan said.
Lake Tahoe Development Company hopes to have a reorganization plan filed prior to the April hearing, Egan said. The plan would convert some of Lake Tahoe Development’s debt and provide for the distribution of cash on hand to the company’s unsecured creditors.
“Debtor believes that its plan will best preserve the debtor’s chance of obtaining value for the substantial amounts invested in obtaining entitlements and permits on this project,” Egan said.
Several of the company’s creditors have complained about the pace of the bankruptcy proceedings in court filings. One group of lenders has gotten fed up about not being paid what they’re owed.
Twenty-six creditors who loaned Lake Tahoe Development Company partner and Carson City land owner John Serpa Sr. $6.5 million for the project are trying to get their money back from the developer.
The lenders took Serpa to Washoe County Second Judicial District Court in February 2010, demanding the personally guaranteed loan be paid back plus interest and expenses. The loan was supposed to be paid back Jan. 1, 2009.
On March 14, the court included a 5-acre parcel of land off of Fairview Drive in Carson City owned by Serpa to ensure the investors are compensated, according to court documents filed in Carson City this month.
Serpa said he had no comment when contacted last week.
Meanwhile, South Lake Tahoe officials are attempting to attract investors and restart construction at the site, said City Manager Tony O’Rourke on Tuesday. The process could take years.
“There’s some prospects out there we continue to work,” O’Rourke said. He said there is “nothing firm” regarding an investor in the project.
– Nevada Appeal reporter Brian Duggan contributed to this report.
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