Creditors to vote soon on mortgage company’s liquidation

By Sean F. Driscoll

BusinessRockford.com

Commercial Mortgage & Finance’s 1,400 creditors will vote soon on whether or not to accept the company’s liquidation plan, now that 50 pages of financial information have been approved by the bankruptcy court.

The plan calls for the company to sell its real estate holdings and mortgage loan portfolio, generating about $25 million to repay creditors. At that total, however, investors would see only about 41 cents for every dollar they invested.

The financial information, called a disclosure statement, was approved this morning by federal bankruptcy Judge Manuel Barbosa. Ballots, plus copies of the disclosure statement and the liquidation plan, will be mailed to creditors in the next week or so. Creditors will have until Aug. 10 to return their completed ballots. A hearing is scheduled for Aug. 19 to review the voting and consider confirmation of the plan.

More than $63 million is owed to creditors, the vast majority of whom invested in Commercial
Mortgage via a negotiable promissory note. The notes, which were offered on six- or nine-month terms, offered a higher rate of return than a traditional certificate of deposit but were not insured against loss by the Federal Deposit Insurance Corp.

The average investor, owed about $51,000, would receive $20,400 under current projections.

Both the statement and plan have been modified from their original versions. Most of the changes are cosmetic, but a few important additions have been made.

First, creditors who filed a claim form against the company but understated what they’re owed will be repaid according to Commercial Mortgage’s records. Gregory Jordan, the company’s attorney, said some creditors didn’t correctly add interest they’re owed on their account or said they were owed nothing.

“In the interests of fairness, we are paying them what our books show they’re owed,” Jordan said.

Also, the remaining employees at Commercial Mortgage’s 115 Seventh St. headquarters will tabulate the ballots from the creditors. Bradley Koch, attorney for the five-member creditors committee, said the change was a money-saving one: it would have cost $50,000 to have an outside firm do the work.

Koch said the process will be monitored, however, to ensure an accurate tallying of votes.

If the plan is approved, the Commercial Mortgage board of directors will be ousted. Michael D’Agostino, who serves as chief executive, would be retained to help with the liquidation process. Four members of the creditors committee would be the company’s new directors and oversee its dissolution.

Commercial Mortgage & Finance Co. does not own CMF Insurance Agency of Rockford.

Reach staff writer Sean F. Driscoll at 815-987-1346 or sdriscoll@rrstar.com.

MORE COVERAGE
Special report: Commercial Mortgage & Finance bankruptcy
Mortgage company files liquidation plan (06/05/09)
Mortgage company’s liquidation plan closer (06/03/2009)
Commercial Mortgage gets OK to shut down subsidiary (05/06/2009)
Mortgage company’s liquidation plan taking shape (04/29/2009)
Creditors have until April 8 to file claim against mortgage company (04/03/2009)
Checks still in the mail for some of company’s creditors (03/17/2009)

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