The thousands of creditors holding notes from failed Metropolitan Mortgage & Securities should receive a small recovery beginning this fall, according to a reorganization plan filed in U.S. Bankruptcy Court.
The amended plan envisions the sale of all remaining Metropolitan property and financial holdings. The money would be placed in special creditors’ trusts and disbursed by a trustee.
This revised plan erases any notion that the company might somehow emerge from bankruptcy and issue stock to creditors. Instead, it is a blueprint for liquidation, said Metropolitan attorney Barry Davidson.
Acting Metropolitan CEO Maggie Lyons has said creditors holding Metropolitan notes will likely receive about 15 cents on the dollar. Those holding Summit notes might expect around 12 cents on the dollar.
The preferred stock issued by the companies, along with the common shares, would be rendered worthless.
The plan has been met with criticism.
P.J. Grabicki, an attorney representing the Metropolitan creditors’ committee, said the plan stripped oversight powers from the very investors with money at stake.
“I don’t think we’re on board with this yet,” Grabicki said Monday after speaking with several committee members. “We have some serious concerns, starting with the fact that it was not done in consultation with us.”
The recovery for noteholders does not include proceeds from the sale of the three insurance subsidiaries, nor does it include possible recoveries from arbitration with Ernst & Young LLP, the large financial firm embroiled in the auditing fiasco that exposed widespread accounting problems at Metropolitan.
The plan needs the support of creditors, most of whom are older investors living in the Northwest.
Grabicki said they have been upset by the money Metropolitan has spent administering the case and complying with federal subpoenas.
Diminishing their role now, Grabicki said, is worrisome.
“The plan does impart the message of `Trust us. We know what’s best for you and we’ll spend your money as we see fit,’” he said. “We wanted language in the plan that would give creditors more control over the purse strings.”
Attorney Davidson said much has changed during the past eight months.
He said the pending sale of insurance companies, along with progress on property and other asset sales have progressed to the point where the appointed trustee will have fewer duties than originally anticipated.
That’s why, he said, the plan calls for creditors role to be one more focused on oversight instead of management.
However, he did say that any transaction totaling more than $500,000 would need the approval of creditors or bankruptcy Judge Patricia Williams.
The plan also would curb the role of lawyers.
Though a trustee has not been identified, it is widely believed that Lyons would be an ideal candidate.
The plan calls for paying a trustee $150 an hour, the same rate Lyons is now paid. That, along with her knowledge of the assets, professional work with attorneys in the case and familiarity with the bankruptcy proceedings make her a popular option, Davidson said.
She has declined to comment on whether she would accept such a job if offered. Davidson said whoever is appointed trustee would likely be working about 30 hours a week by late fall, and then perhaps 10 hours a week in 2006.