RE LOANS FILES FOR BANKRUPTCY PROTECTION

RE Loans filed for bankruptcy.  While this was inevitable, no doubt, it’s still a shock to the system.  Despite the fact that it’s our money, our lives and our futures, the real bankrupt entity is the Ng Family Dynasty.  They’re morally bankrupt.  They’re ethically bankrupt.  Yet they’re still out there doing business and tricking more suckers like us out of their hard-earned savings.

Maybe Led Zepplin said it best in “When the levee breaks”

If it keeps on rainin’, levee’s goin’ to break,
When The Levee Breaks I’ll have no place to stay.
Mean old levee taught me to weep and moan,
Got what it takes to make a mountain man leave his home

Equitatus posted the following a few minutes ago:

RE Loans Declares Bankruptcy in Texas

R.E. Loans, LLC commenced chapter 11 proceedings in the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division. The case no. is 11-35865-bjh11 and has been assigned to the Honorable Barbara J. Houser.

1. Motion For Order (I) Authorizing Debtors To (A) Obtain Interim Postpetition Financing On A Superpriority, Secured And Priming Basis In Favor Of Wells Fargo Capital Finance, LLC; (B) Turn Over Cash Collateral On An Interim Basis; (C) Provide Adequate Protection To Wells Fargo Capital Finance, LLC And The Noteholders; (D) Modifying The Automatic Stay; And (E) Authorizing Debtors To Enter Into Postpetition Agreements With Wells Fargo Capital Finance, LLC; And (II) Scheduling, And Establishing Deadlines Relating To A Final Hearing And Order Authorizing The Debtors To Obtain Postpetition Financing And Use Of Cash Collateral; Memorandum Of Points And Authorities (“DIP Financing Motion”);

2. Exhibit “1″ to the DIP Financing Motion “Joint Stipulation And Agreed Interim Order: (I) Authorizing Debtors To (A) Obtain Post-Petition Financing On A Super-Priority, Secured And Priming Basis In Favor Of Wells Fargo Capital Finance, LLC; (B) Use Cash Collateral On An Interim Basis, (C) Provide Adequate Protection To Wells Fargo Capital Finance, LLC And The Noteholders, And (D) Enter Into Post-Petition Agreements With Wells Fargo Capital Finance, LLC; (II) Modifying The Automatic Stay, And (III) Scheduling A Final Hearing Pursuant To Bankruptcy Rule 4001;”

3. Declaration Of James A. Weissenborn In Support Of Motion For Order Authorizing Debtors To (A) Obtain Postpetition Financing On A Superpriority, Secured And Priming Basis In Favor Of Wells Fargo Capital Finance, LLC (“Wells Fargo”); (B) Turnover Cash Collateral To Wells Fargo; (C) Provide Adequate Protection To Wells Fargo And The Noteholders; And (D) Enter Into Postpetition Agreements With Wells Fargo (“Weissenborn DIP Financing Declaration”‘)

4. Exhibits A through G to the Weissenborn DIP Financing Declaration

5. Application To Authorize Employment Of Mackinac Partners And James A. Weissenborn On An Interim And Final Basis From The Petition Date, To Provide Interim Management And Management Assistance To The Debtors Pursuant To 11 U.S.C. § 363 (“Mackinac Employment Application”);

6. Declaration Of James A. Weissenborn In Support Of Application To Authorize Employment Of Mackinac Partners And James A. Weissenborn On An Interim And Final Basis From The Petition Date, To Provide Interim Management And Management Assistance To The Debtors Pursuant To 11 U.S.C. § 363; and

7. Exhibits to the Mackinac Employment Application.

 The Court has not set a hearing on any of these motions. The Debtors have asked that the first day motions be set for a preliminary hearing granting interim relief on either Thursday, September 15, 2011 or Friday, September 16, 2011. I will l notify you by email of the hearing date and time as soon as the Court rules on the Debtors’ request for expedited hearings.I will post the documents after 10pm tonight.
Also, here are the latest lies from Weissenborn – currentnews_bk (CLICK HERE)
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61 thoughts on “RE LOANS FILES FOR BANKRUPTCY PROTECTION

  1. By filing bankruptcy in Texas allows Weisenborn to also produce all records to the courts there and control all the books. Bar-K, Capital Salvage, RE Loans etc. B-4 was the management company of R.E. Loans and all proceeds filtered through that account both incoming from Wells and outgoing to R.E. Loans and or the managers. B-4’s records are the most valuable books we could possibly look at. That is the magic account and Weisenborn wants to control it??? Without having access to B4-‘s records, we can never find the flow of the funds over the years. This my friends is why they want to file in Texas to not allow full disclosure.

  2. John – when considering the notes, whether a property is in CA or FL, it doesn’t matter. The collateral and the value is literally the note or the piece of paper. Those notes are likely in WF’s office. Again, geography does not matter regarding the notes. The value is not in the property, it’s in the note – an important distinction. Please understand, I agree that this is a weak argument and I don’t support the TX filing, but it’s likely the argument they made.

  3. The test for bankruptcy jurisdiction is not 50% – it is ANY contact with the portion of the state covered by the courthouse.

    I believe energy is best spent pushing your agenda (i.e. finding the money and bringing it back so that it can be distributed to investors) instead of trying to move the case to California. As someone who spends a lot of time working with bankrupt entities and their constituents, the (sometimes) very tenuous ties to distant courts are extremenly difficult to cut.

    It is possible to “take over” the case and take control of the investigation. By participating in the creditors committee and arguing that the investors are the parties impacted most by the recoveries (since WF appears to be fully secured) it makes sense that the creditors committee be the entity that takes over the tracing of funds and their recovery back into R.E. Loans. This eliminates many of the issues with the current advisor regarding a lack of information / transparency, and as your advisor you have a lot of control over how much is spent and what is investigated (since you hired the advisor).

    My thought is that, from a forensic standpoint, you are interested in both:

    1. Tracing the funds – where did they come from and where did they go. If not to borrowers to fund loans from R.E. Loans, to whom and for what. This would entail following the investments, the movements between the accounts, and the ultimate disposition. While some of the loss could be the difference between the amount loaned and the current value of the collateral, other unauthorized uses of funds should be identified.
    2. Finding the funds – to the extent that they went somewhere they should not have gone (i.e. to the managers in an amount beyond their contractual management fee), where are they and how can we attach them and bring them back. This can be useful to the extent the personal guarantee is at issue – we still need to find the funds in order to collect what is owing.

    What you need is an aggressive lawyer and a financial advisor that both knows the bankruptcy process AND can perform a thorough forensic investigation aimed both at tracing the funds and recovering the funds.

    Let me know if this resonates with you.

    • “The test for bankruptcy jurisdiction is not 50% – it is ANY contact with the portion of the state covered by the courthouse.”

      Obviously not a bankruptcy expert, I only know what I read in the actual court document;
      ““Debtor has been domiciled, or has had a residence, principal place of business, or principal assets in this District for 180 days immediately preceding the date of this petition or for a longer part of such 180 days than in any other District”.

      To me, “ANY contact” doesn’t equate to “principal place of business, or principal assets . . .”.

      I agree with you about one thing for sure . . . we need an “aggressive” law firm to represent us. Between John Robie and I we have spoken with a couple of dozen lawyers in the past (almost) three years. None of them have been very aggressive for ‘our’ case.

      • My response was more of a practical answer. Many have fought it, with little success.

        I suspect the layering of bankruptcy over the situation provides the additional tools to allow counsel to be more aggressive.

        I suspect the attorneys interviewing to be counsel to the committee will be aggressive – if not let me know and I will add a name or 2 to the interview process.

    • Are these unpaid balances including Wells Fargo’s jacked up interest and late fees? Because I know real estate is way, way down, however…. almost every single property on that list is now estimated at being worth less than 25% of what is owed on it. Some are worth less than 10% of what was owed.

      Or were those the inflated values the Ng’s gave property to justify their fees?

      Because I think it would be difficult for even the stupidest of people to consistently pick so many properties that lost so much. Only one piece on that list is valued at above 50% of what is owed, and that is with caveats. Or were they never worth what is owed on them?

      • kmum:

        Although this does not directly answer your question, Wells Fargo Foothill divided the loan portfolio into eligible and ineligible loans before agreeing to the line of credit in July 2007. According to that analysis, only $284M of the $752M portfolio was eligible as collateral for the line of credit. At a 5:1 ratio, $284M was adequate to cover the $50M loan.

        • Does anyone know the status of the SEC Investigation? Will they request new documentation and proceed with a new hearing?

  4. DIP update:

    DIP dimensions: R.E. Loans LLC
    by Kelsey Butler
    Updated 10:10 AM, Sep-22-2011 ET
    The tables have turned for mortgage lender R.E. Loans LLC, as it has had to hunt for funding itself.

    The Lafayette, Calif., company, which lent money to homebuilders and real estate developers as a “hard money” lender, filed for Chapter 11 protection on Sept. 13, blaming the general economic recession and its effect on the real estate market. In court papers, R.E. Loans said that virtually all of its borrowers that had outstanding balances due in 2008 had defaulted, leaving the company with no regular cash flow.

    R.E. Loans and its debtor affiliates said cash payments from borrowers and sale proceeds from real estate on which it already has foreclosed are not enough to sustain the company alone.

    “The debtors are unable to continue their business effort absent debtor-in-possession financing,” R.E. Loans said in court papers filed Sept. 13. “The debtors have virtually no performing loans and generate very little regular monthly cash flow.”

    R.E. Loans thus set out to follow in the path of other mortgage lenders that collected postpetition financing, such as Taylor, Bean & Whitaker Mortgage Corp.; Mortgages Ltd.; Luminent Mortgage Capital Inc.; American Home Mortgage Investment Corp.; and Fieldstone Mortgage Co. R.E. Loans, however, aims to avoid the liquidation fate of many of those lenders, such as Mortgages Ltd., which like R.E. Loans lent money to real estate developers.

    R.E. Loans in January 2010 enlisted consulting firm Mackinac Partners LLC to assist it in dealing with its existing defaults to creditors, including secured lender Wells Fargo Capital Finance LLC, court papers said. Mackinac identified 15 potential lenders, and three signed term sheets with Wells Fargo to potentially acquire its roughly $68 million in existing debt and discussed potential financing terms, according to a Sept. 13 affidavit of Mackinac principal James Weissenborn, chief restructuring officer for the debtor.

    Ultimately, however, all of the other financing commitments fell through due to Wells Fargo’s first-priority lien on substantially all of the debtor’s assets. Without the potential lenders acquiring the debt or otherwise paying Wells Fargo in full, their demand for a first lien on the debtor’s assets set up a prospective priming battle with Wells Fargo, which R.E. Loans warned could have led to a fire sale of its assets had the prepetition lender come out victorious.

    R.E. Loans thus ultimately secured a $21.5 million financing commitment from Wells Fargo. The lender provided a $50 million working capital line of credit on June 17, 2007.

    The DIP, which is all new money, will accrue interest at an annual rate of LIBOR plus 1,400 basis points, court documents said.

    It has an initial term of six months, but Wells Fargo has agreed to extend the terms of the financing through Dec. 31, 2012 — converting the DIP to an exit loan — to give the debtors additional time to pay off the debt.

    Under the DIP, Wells Fargo will retain its first lien on all pre- and postpetition assets of R.E. Loans, and it can terminate the financing if any other party is granted a higher-priority lien without Wells Fargo being paid in full. Wells Fargo can also cancel the financing if any party in interest files a motion challenging the validity or priority of its liens, court papers said.

    Wells Fargo also has set a series of milestones for asset sales that would result in the lender being repaid by the end of next year — faster than the three to five years R.E. Loans said would maximize the value of its assets, but yielding a better result than an immediate liquidation, which would leave noteholders owed some $776 million largely out of the money.

    “Paying off Wells Fargo should not require liquidation of [our] entire portfolio” of loans and real estate, R.E. Loans emphasized.

    The debtor must hand over at least $25 million in cash proceeds to Wells Fargo by Jan. 31, 2012, or it could terminate the DIP. Additional $25 million payments would be due April 30 and July 31.

    R.E. Loans — which, like other hard-money lenders, made short-term, or bridge, loans at high interest rates — said its loans totaled $637 million as of the petition date, including real estate on which it has foreclosed. Its cash flow comprises proceeds from selling off those assets.

    The lender has foreclosed on 17 loans totaling about $308.6 million and is foreclosing on four additional loans, totaling roughly $74 million, court papers show. R.E. Loans said it has not yet commenced foreclosure proceedings on an additional 19 loans in default. The latter loans have a combined unpaid balance of $273 million.

    R.E. Loans took its first step toward repaying creditors on Sept. 16, when Judge Barbara Houser of the U.S. Bankruptcy Court for the Northern District of Texas in Dallas approved interim use of $1.7 million of the DIP. R.E. Loans is scheduled to seek access to the remaining $19.8 million on Oct. 6, court papers show.

    Debtor counsel Holland N. O’Neil of Gardere Wynne Sewell LLP could not immediately be reached for comment. Wells Fargo counsel David Weitman of K&L Gates LLP declined comment. — Kelsey Butler

    Company name: R.E. Loans LLC

    Commitment: $21.5 million

    Lender: Wells Fargo Capital Finance LLC

    Pricing: LIBOR plus 14%

    Term: Matures in six months

    Fees:

    $250,000 commitment fee for first six months
    $5,000 monthly administrative fee

    Carve-out: $200,000 for debtor counsel, $40,000 for counsel to creditors’ committee

  5. I don’t get it. The value of the loans outstanding at time of bankruptcy is $637 million. Less than a year ago in his CRO bucket list the value was $685 million.
    In December 2009 the Loan Valuation reported the total outstanding loans at $690 million, and it was reported by the Ngs themselves in 2007 that they had $750 million worth of loans. How can they loose, spend $88 million?

    Is there a slow leak in the tire somewhere or internal bleeding.

    WFF loan is larger than ever $65 million, and is going to be raised higher with the DIP financing.

    • They are drawing down on the line and using the funds to pay taxes, expenses, mgmt.fees, Mackinac fees and other items they choose. There has been prin. payoffs and paydowns. They have applied those dollars to the line which brings it down then redraw against it again and again, staying at the reserve amount. That is why the assets are depleating and the line is still the same. Cleaver…are money is dwindeling away at a steady pace.

  6. I don’t know, of course, but I suspect that the difference is loan amount versus collateral value. When they foreclose, they may be writing the loan value down to the FMV value of the collateral.

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