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Creditors wait for cash

Tue., March 16, 2004, 11:09 a.m.

Bankrupt Met prefers debt-stock swap, puts buildings up for sale

Monday’s meeting of Metropolitan Mortgage & Securities Inc. creditors was reduced to one pressing question: “Will we get our money back?”

“Basically, we just wanted someone to give us information, like ‘What are the prospects for getting something back?”’ said Harry Martin of Spokane.

The answers weren’t so simple, but Metropolitan’s new management team pledged to try.

Chief Financial Officer William Smith arrived at the troubled company last August, long after the company knew it was in financial duress.

The best he could offer the approximately 1,500 people attending the meeting was that the company is evaluating and protecting its core assets and would devise a plan that returns the most money - albeit not quickly - to the investors-turned-creditors.

Dozens asked questions during the five-hour meeting.

The company is entertaining offers for its 18-story Metropolitan Financial Center high rise at First and Wall.

It paid about $11.7 million cash for the building in 1997. But half the floors now sit empty, Smith said, and moving the troubled company makes sense. He declined to elaborate, but Metropolitan has fewer than 160 employees left, down from nearly 700 workers several years ago.

The company also plans to sell the Metropolitan Performing Arts Theater. Valued at about $900,000, the refurbished theater is a downtown gem that hosts everything from reading festivals and independent films, to concerts and comedy shows.

The theater has collected a $250,000 to $300,000 annual subsidy from Metropolitan’s insurance affiliate that will end, according to the Washington Insurance Commissioner’s Office.

The commissioner has placed Western United Life Assurance Co. into receivership with plans to rehabilitate its finances outside the influence of Metropolitan.

Job One for Smith is to try to uncover the most value for the now-worthless securities.

Most are held by older investors, as evidenced by the meeting attendance.

Many are still confused about what happened at Metropolitan, which nurtured an image as a safe place to invest for people like Martin and his wife, Geri. They had about $35,000 invested with Metropolitan.

Geri invested the money her grandson was given when his mother (Geri’s daughter) died about 10 years ago.

She tucked the money away into what she assumed was a safe investment. She planned to use it help him pay for school.

“That’s the sad part. I think that money is gone,” she acknowledged.

Harry called the debacle unbelievable.

“Old Sandifur Sr. seemed like such a good common man. He was down to earth and had a lot of friends,” he said.

The late C. Paul Sandifur Sr. started Metropolitan in 1953. For 50 years the company met its investor obligations.

Then last year the company began to crumble.

It culminated in Metropolitan’s Feb. 4 bankruptcy filing.

Monday’s meeting was called by U.S. Trustee Jake Miller. It offered a chance for creditors to ask questions of the company and the lawyers appointed to represent investors in the unfolding case.

Miller told creditors to ask questions rather than make statements about the company and ousted management such as Sandifur’s heir, C. Paul Sandifur Jr.

The rules led to a very subdued hearing.

The company hopes to reorganize and emerge from bankruptcy. One proposal is a debt-for-stock swap, with creditors becoming shareholders in a new Metropolitan.

Smith prefers such a plan to an outright liquidation, where all the company’s assets are sold with the money used to first repay secured creditors - such as business partners with claims collateralized with real estate - followed by unsecured claims such as the creditors gathered Monday.

Lower still are the preferred stockholders of Metropolitan. Considered equity investors, these preferred stockholders will be paid only if Metropolitan has any money left over.

Several investors said while leaving the meeting that they were satisfied with the information.

“At least we better understand how this thing is going to work,” said James Simmons of Burlington, Wash.

He traveled to the meeting with wife Eldeen Simmons, who took offense with some of Metropolitan’s spending habits. She noted the Metropolitan Club’s luxury box in the Arena, with its name emblazoned across the front in thick gold letters.

“I wish Sandifur and the other executives would have been here to see all these people,” she said. “Most everyone here are common people who worked their entire lives and saved for retirement.”

“Now it’s like, ‘Poof!’” she added, “Our money is gone.”



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