Court extends CBG refinancing plan 21 days

WILKES-BARRE - CBG Limited has 21 days to provide "an iron-clad commitment" to refinance its debts or PNC Bank's plans to sell the Valley of Lakes will proceed.

At a hearing Monday in U.S. Bankruptcy Court, Judge John Thomas granted the developer another extension - this time to Nov. 29 - so its attorneys can amend the reorganization plan they filed Aug. 31.

Attorney Myles Wren, who represents the bank, explained that CBG will attach "an iron-clad commitment from a funding source" to the document. The source, he said, must be a recognizable bank or other financial institution that can be identified as being able to handle CBG's debts.

In addition, the amended plan also must outline a list of improvements to be made within the development and a "binding economic assurance" - in the form of a bond, a letter of credit, or cash - that the work will be completed.

CBG's failure to provide those things in 21 days, Wren said, will be interpreted as its consent to the bank's proposal - the appointment of a Chapter 11 trustee who would market, and then sell, the entire property to a third-party developer.

PNC Bank, in the meantime, will amend its reorganzation plan to clarify that Valley of Lakes would be sold, rather than refinanced; to formally request the appointment of a trustee, and to "carve out" the trustee's commission from $500,000 the bank would set aside to fund the plan.

The agreement was reached prior to the court hearing by attorneys from CBG Limited, PNC Bank and other interested parties and was then read into the hearing record by Wren.

Thomas scheduled the next hearing, at 10 a.m. Nov. 29, to consider both reorganization plans and to hear petitions by the U.S. trustee and various creditors that the case be converted to Chapter 7. That change would remove the protection from creditors CBG and four affiliated companies have had for the past 2 1/2 years.

CBG has proposed forming a new company, Eagle Rock Resort Inc., that would obtain $25 million from a new funding source. It would pay $5 million to PNC, which is owed at least $24.1 million, and would buy CBG's assets for another $5 million.

The remaining $15 million would be used to complete various amenities in the development, including roadways and utilities to several homes; to resume the sale of lots, and to maintain service to existing property owners.

Frank M. Cedrone, managing general partner of CBG Limited, would own 80 percent of the new company's stock, while the lender/investor would own 20 percent.

The original funding source had been identified as Agnew International, headquartered in Tortola, British Virgin Islands.

Attorney Frank Hoegen, who is co-counsel for CBG with his father, Peter, said outside court that the new funding source "is a better deal for everybody." He would not identify the company, but said it is based in the United States.

Other than the changes outlined in court, CBG's reorganization plan would remain intact, Hoegen said.

Wren told the judge the amendments would satisfy all parties that had objected to CBG's reorganization plan except for the Kleppinger Trust, which holds the mortgages on Valley Utilities Co. and Oneida Water Co. Those firms provide sewage treatment and water services, respectively, to the development.

The other CBG affiliates involved in the case are Trachele Inc., which operated the Eagle Rock ski area and two lodges, and Chez-Rael Inc., which operated a restaurant and motel operation.

At the start of Monday's hearing, Thomas disclosed that the Hoegens are buying a building he owns on South Franklin Street in Wilkes-Barre, and asked if the attorneys wanted to discuss that issue first. However, none of them expressed concern.

The U.S. Internal Revenue Service and the state attorney general's office were among the parties represented in court Monday. Several property owners also were present.