Friday, Oct. 2, 2009 | 3:55 p.m.
- Current, past owners spar in Lake Las Vegas bankruptcy case (9-21-2009)
- Council briefed on Lake Las Vegas bankruptcy (9-15-2009)
- Lake Las Vegas proposes bankruptcy plan (9-5-2009)
- Lender sued over Lake Las Vegas loans (9-3-2009)
- Lenders to foreclose on Lake Las Vegas’ last golf course (6-29-2009)
- Judge approves bankruptcy for Lake Las Vegas golf course (6-29-2009)
- Another golf course to close at struggling Lake Las Vegas (6-25-2009)
- Lenders seek control of Lake Las Vegas hotel (6-4-2009)
- Residents of bankrupt Lake Las Vegas face uncertainty (3-23-2009)
- Lake Las Vegas can abandon golf course, judge says (1-15-2009)
- Amid the decline, decadence for the feet (1-5-2009)
- Judge: Lake Las Vegas golf course should be shuttered (12-22-2008)
- Resort golf course’s fate spurs debate (12-16-2008)
- Never spoil a good party with talk of a recession (8-29-2008)
- Bridge over troubled water (5-24-2008)
Map of Lake Las Vegas Resort
1600 Lake Las Vegas Pkway, Henderson
A judge rejected a request Friday that the $728 million Lake Las Vegas bankruptcy case be dismissed -- setting the stage for further court battles between the current and former owners of the Henderson resort community.
Former owner Transcontinental Corp. and its Transcontinental Properties Inc. unit, creditors in the case based in Santa Barbara, Calif., moved Aug. 20 that the bankruptcy be dismissed because it's a charade in which lender Credit Suisse Group AG is both the main creditor and also controls the debtor.
But during a hearing Friday, U.S. Bankruptcy Judge Linda Riegle questioned the timing of the motion, noting Transcontinental could have made the same request closer to when the case was filed on July 17, 2008.
"You have known about this all along and let the (bankruptcy) estate spend all this money" on the bankruptcy case, Riegle told Transcontinental attorney Christian Onsager of Denver.
Riegle also repeatedly questioned Onsager about Transcontinental's motive.
Lake Las Vegas attorneys have argued Transcontinental is trying to avoid having the Lake Las Vegas bankruptcy reorganization plan be confirmed because confirmation would result in funding for a lawsuit against Transcontinental over its dealings before the bankruptcy.
Onsager acknowledged "fraudulent conveyance" actions are possible against both former Lake Las Vegas insiders and Credit Suisse.
He said delays in filing the motion to dismiss were associated with Transcontinental waiting to see what Lake Las Vegas would come up with in its reorganization plan.
Onsager argued the plan is "not confirmable" because of alleged wrongdoing by Credit Suisse and said that rather than deal with the issues in the context of plan confirmation hearings, "We'd like to deal with it now."
Additional hearings are scheduled through the end of December on the reorganization.
In the meantime, Transcontinental is likely to press its investigation into Credit Suisse's lending to the project and attempt to link it to a wider Credit Suisse loan program during the economic boom earlier this decade.
In a widely-followed case in Montana involving the exclusive Yellowstone Club bankruptcy, Credit Suisse has been accused of predatory lending and Onsager on Friday noted the judge in that case has mentioned Lake Las Vegas as being part of the same loan program.
The loan program, critics have charged, overloaded Lake Las Vegas with debt and stripped it of equity by allowing its investors to cash out their equity interests.
In the Yellowstone Club and other developments financed by the loan program, critics have charged Credit Suisse was motivated by fees it earned and used inflated appraisals to justify the deals.
Credit Suisse has denied the allegation of predatory lending.
How these transactions affected the former Lake Las Vegas equity holders and creditors are likely to be examined during confirmation hearings for the Lake Las Vegas reorganization plan.
In arguing against the motion to dismiss, attorneys for Lake at Las Vegas Joint Venture LLC and its affiliates in the Chapter 11 cases said Transcontinental is acting not as an unsecured creditor, but as a defendant in a pending bankruptcy court lawsuit over infrastructure funding development disputes.
They said Transcontinental is also acting as a likely defendant "in certain anticipated post-confirmation litigation against the debtors' former insiders, including litigation to recover more than $400 million in transfers from the debtors to the debtors' former equity holders."
"Transcontinental's goal in bringing the motion is not to make it easier for general unsecured creditors to obtain payment from the debtors. General unsecured creditors stand to receive absolutely nothing if the cases are dismissed," Lake at Las Vegas attorneys said in a court filing before the hearing. "Rather, Transcontinental's goal is obstructionist. Transcontinental seeks to make it as difficult for the debtors as possible to bring causes of action against Transcontinental and the debtors' other former equity holders and insiders.
"Transcontinental's real goal in seeking the dismissal of the cases is to force the debtors into a freefall liquidation, where the debtors will lack the ability to cover the costs of pursuing litigation and where the debtors will lose potential witnesses and documents that would otherwise be used in that litigation," Lake at Las Vegas said in its filing.
The Lake Las Vegas development on Sept. 4 proposed a plan to emerge from its bankruptcy case in which homebuilding would continue once the economy improves and Credit Suisse and other lenders would see a portion of their loans to Lake Las Vegas converted into a controlling equity interest in the development.
A disclosure statement on the reorganization plan did not project how much money creditors may eventually recover under the plan.
Lake at Las Vegas has said the reorganized company would have access to an additional $10 million in financing from one or more of the existing debtor in possession lenders.
General unsecured creditors would receive a share of a designated fund and a share of the litigation claims.
There is also expected to be provision for the completion of some work to enhance the development financed by local improvement district bonds, as well as payments to vendors that provided pre-bankruptcy infrastructure work.
Under the plan, the case's Official Committee of Unsecured Creditors would drop its own predatory-lending lawsuit against Credit Suisse.
Before two of its three golf courses were closed because of financial problems, the 3,600-acre Lake Las Vegas was marketed as a golf course development. The project 20 miles southeast of the Las Vegas Strip includes more than 1,600 residential units, two luxury hotels and a casino.