Trustee: Pull bankruptcy protection for resorts

A trustee has asked the U.S. Bankruptcy Court that the Valley of Lakes and Eagle Rock resorts no longer be protected from creditors.

The debtors "have not filed acceptable plans of reorganization or disclosure statements ... and appear unable to rehabilitate their affairs," the motion, filed July 2 , in Wilkes-Barre, states.

It proposes that the Chapter 11 bankruptcy cases of CBG Limited and six affiliates - Trachele Inc., Eagle Rock Ski Area, Valley Utilities Co. Inc., Ravens Run Equestrian Center, Oneida Water Co. and Chez-Rael Inc. - be converted to Chapter 7.

Under Chapter 7, the U.S. trustee would take over the companies' assets, either selling them or assuming control of their operations. Secured creditors would be paid first, and whatever is left would be divided among the unsecured creditors.

A notice to creditors and other interested parties, filed Thursday, allows written objections to be filed until Sept. 1, with a hearing to be held at 10 am. Oct. 5.

If no objections are filed, it states, an order converting the case to Chapter 7 "may be entered by the court without further notice."

The 4,000-acre property in Hazle, Black Creek, East Union and North Union townships is listed for sale by the Luzeme County sheriff at 10:30 a.m. Sept. 3. That sale would satisfy CBG Limited's debt to First Eastern Bank, which reportedly loaned it S14 million.

CBG Limited and its affiliates filed for Chapter 11 bankruptcy protection in March 1992 after a two-year struggle to obtain financing for various projects, including a golf course designed by Arnold Palmer and a 260-unit townhouse development.

But the trustees' motion says the companies have not filed a reorganization plan or disclosure statements in those 15 months and have failed to pay quarterly fees totaling $5,000 to the court.

The debtors' "only hope of rehabilitation is to obtain a purchaser for their assets or a source of funding to permit operations to continue," it says. "Unfortunately, no financing has been found ...

"As a result of debtors' delay, any equity that remains in any of debtors' property is being consumed by increasing claims of secured lenders to the detriment ofjunior creditors.

"Under the circumstances, the U.S. trustee avers that there has been inexcusable delay that is prejudicial to the creditors in this case."

Attorney Peter J. Hoegen Jr. of Wilkes-Barre, in response to the motion, states that the debtors "believe and anticipate that they shall be able to successfully refinance their operation."

The continued attempts to refinance, he wrote, are "in the best interests of unsecured creditors and are the only significant hope that unsecured creditors have of malting any recovery whatsoever."

Hoegen disagreed with the motion's claim that the debtors do not operate any businesses, stating that CBG Limited, Valley Utilities and Oneida Water are operating.

His reply also states that the trustees' basis for conversion to Chapter 7 - undue delay, inability to reorganize and failure to pay quarterly fees - "are incorrect and insufficient."

In a separate motion filed Aug. 2, an attorney for the state Department of Labor and Industry joined the U.S. trustee in requesting conversion to Chapter 7.

Attorney Bernard Podcasy, assistant counsel for the Bureau of Employer Tax Operations, wrote that CBG, Eagle Rock, Valley Utilities and Ravens Run have failed to pay post-petition unemployment compensation taxes totaling $10,970.68. Chapter 11 gives a business protection from its creditors while it reorganizes and refinances its debts.

Frank M. Cedrone, managing general partner for CBG Limited, announced two weeks ago that the necessary paperwork has been completed to allow the refinancing to proceed.

He said CBG has received "a pledge of a bank loan guarantee in the form of a standby forward takeout commitment."

Among the creditors listed by CBG Limited are the RCP Construction Co. of West Paterson, N.J., which is owed S718,164; Arnold Palmer Golf Management of Cleveland, $439,373.07 for management and design consulting fees; No. 1 Contracting Corp. of West Pittston, S340,982 for equipment rental and labor, and Chiara Associates of Philadelphia, $321,122.91 for advertising.

CBG also owes a total of S216,514 in property taxes to the four townships and S146,020.38 to the Internal Revenue Service for federal withholding tax

The court papers state that Oneida Water and Valley Utilities provide water and sewage treatment, respectively, for the Valley of Lakes housing development, and list Trachele and Chez-Racl as restaurant operations.