From the start, the purpose of these ‘THINGS TO KNOW‘ columns has been to make sure that you have the information you need to make an informed decision about the future of Continental Country Club when that time arrives.
The frustration, of course, is that even as we try to be as transparent as possible in these communications, U.S. bankruptcy laws prohibit us from sharing certain information with you that has not been approved by the Bankruptcy Court.
The Plan of Reorganization & The Disclosure Statement
Before we can move forward, the problems underlying our Chapter 11 reorganization case must be resolved through a bankruptcy reorganization. The crux of our reorganization will be addressed by our plan and disclosure statement, both of which will be filed with the Court and disclosed to you in due course.
Our plan will be formulated to propose restructuring treatment to our creditors and the Court (creditors are those that have filed claims with the Bankruptcy Court but does not include individual homeowners/members). The board – your elected representatives – continues working with counsel to formulate a plan that treats our creditors, including the Lake Elaine litigant group, in a manner that it believes can be reasonably supported by the association through fee revenues in the long term and satisfy all other requirements of applicable bankruptcy law.
The disclosure statement accompanying the plan will be designed to give our creditors adequate information about the plan so that they can make an educated decision as to whether or not to vote in favor of accepting the plan. This information will necessarily include disclosures of the association’s historical and projected finances.
The plan and disclosure statement will be filed on the same date, but the process for their approval differs. First, before the association can solicit creditors’ votes in support of the plan, the disclosure statement must be vetted and approved by the Court after a hearing. Initially, the disclosure statement will not be filed with financial projections, but it will be supplemented with projections prior to the Court’s hearing to consider its approval. This is called the “Disclosure Statement Approval Period.”
Understandably, many of you are interested in how you will get to provide your feedback on this entire process. Your time for feedback to our board will be during the Disclosure Statement Approval Period. Using the plan as filed, the board will be developing alternative financial models that will support the plan obligations, including variations of modeling based on differing levels of both special and annual fee assessments.
The board will share these models at a town hall meeting and, after receiving your feedback on these models, the board will determine a final fee proposal that will be included as a supplement to the disclosure statement as approved by the Court. After that, our members can either support the plan or reject it by voting to approve or disapprove the final model selected by a vote of the association’s members that will run parallel with the association’s solicitation of plan support from its creditors.
Note: The ‘timing’ for the following steps has been adjusted and may be readjusted again in the future; however, the overall steps to achieving resolution are as follows:
- Plan and Disclosure Statement Filing. The current deadline by which we must submit our disclosure statement and reorganization plan to the Court is October 8, 2021. While we do not anticipate requesting an extension of that deadline, the deadline may be subject to change, and therefore our timeline below will be based on general timing after the filings, regardless of when the filings occur (hereafter the “Filing Date”).
- Town Hall Meeting. Within approximately two weeks after the Filing Date, the board will host a town hall meeting and public forum to present and explain the special assessment and annual assessment alternatives that will be required to pass in order to support the plan as proposed. While the association may entertain a discussion about the plan terms, the focus of the meeting will be on the assessments needed to support the plan as filed and will not be for the purpose of soliciting votes from creditors to support the plan (individual association members are not creditors and will not vote on the plan – only the fees necessary to fund the plan.)
- Final Financials/Disclosure Statement Approval. Within approximately 30-45 days after the Filing Date, the Court will conduct a hearing for approval/disapproval of the disclosure statement. Prior to that hearing, the board will adopt final plan financial projections based on a combination of special and annual assessments that it will adopt as final after considering feedback at the town hall meeting and file as a supplement to be approved with the disclosure statement at the hearing. Should the Court not approve the statement, we will work to amend it to address any shortage of information. If the Court does approve the statement, then we will move to the next step.
- Fee Solicitation to Association Members. Within approximately 7 days after the Court approves the disclosure statement, the association will mail all members eligible to vote a “Notice with Plan and Disclosure Statement.” Members will be asked to vote by a certain date as to whether they support the proposed funding mechanism for the reorganization plan – which will take the form of a special assessment and/or a dues adjustment.
- Balloting Deadline/Member Meeting. On the balloting deadline, the association will host a member meeting to approve the proposed funding mechanism, at which a 60% participation is required to constitute a quorum. A small but important detail here is that, if the first solicitation of votes fails, we will be allowed another opportunity to pursue the final vote in a subsequently held meeting with a 30% Quorum however we will not be allowed to make any changes to the proposed mechanism.
If our members approve the fee adjustment required to support the reorganization plan and the plan is appropriately supported by creditors and approved by the Court, then we will be able to emerge from Chapter 11. At that point, we will have:
- a plan for the long-term maintenance of our buildings and grounds;
- a permanent resolution to the Lake Elaine dispute with our neighbors; and
- a re-amortized, secured debt with Sunwest Bank that will turn an unmanageable balloon payment into a reasonable long-term liability.
Our next ‘THINGS TO KNOW’ column will address the potential consequences of failing to win Court approval of the plan.
We appreciate the many members who have approached us with their thoughts and suggestions through the Board email and by talking with Board and administration members. Your comments are valued and we will address your questions as we are able to. Please continue to contact us at firstname.lastname@example.org and Thank You!