Last day for Commercial Mortgage

By Sean F. Driscoll

BusinessRockford.com

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ROCKFORD — Commercial Mortgage & Finance’s end came not with a bang but a relative whimper, after a quick court hearing this morning ended the bankrupt company’s 80-year history.

Judge Manuel Barbosa approved a dissolution plan that calls for the sale of the company’s assets, mostly real estate, and the gradual wind-down of operations at the firm and its four subsidiary companies. The proceeds will be used to repay the company’s 1,400 creditors, who are owed $63 million.

The plan was approved by nearly 98 percent of the 927 creditors who voted on it. Only 19 “no” votes were cast, according to court documents.

“I’ve never had a case with such overwhelming support of a plan, especially a case of this size,” said Gregory Jordan, attorney for Commercial Mortgage.

Only a handful of creditors attended the morning court hearing, a stark contrast to the hundreds of angry investors who flooded the first meeting. That session was first held in an undersized conference room but later moved to the Coronado Performing Arts Center.

Commercial Mortgage sold promissory notes to investors on six- and nine-month terms, offering a higher rate of return than a traditional certificate of deposit. The company, which traces its roots to 1929, filed for Chapter 11 bankruptcy Oct. 8 after a rash of investors tried to cash out their notes.

The average investor is owed about $50,000.

Starting today, the reorganized company has new overseers. Four creditors — James Larson, James McKnight, James Rebecca and Carl Kampmeier — will run the company and oversee the sale of assets.

Although much of the repayment amount depends on the prices the company’s real-estate holdings and mortgage-loan portfolio fetch, initial estimates call for creditors to receive just 41 cents on the dollar. The money will be paid gradually as the cash becomes available from the assets’ sales. Jordan’s role in the case is largely over, but Rockford attorney Brad Koch will continue to advise the creditors running the company. Koch said based on an initial look at the company’s cash accounts, a round of checks should be cut to creditors within 60 days.

“From there, we hope for at least yearly payments, or more often as circumstances allow,” he said. Among the first orders of business will be bringing accounting firm Farrell & Associates in to review Commercial Mortgage’s books. Along with helping keep the company’s books in line as the company is sold off, Koch said the firm will be doing some “forensic accounting” to find out what led to the company’s demise.

Although the company is being dissolved, it will be business as usual for now for those whose home or commercial loans are held through the company. A skeleton crew will be kept at the company to keep business operations going until CMF Mortgage Co., the residential mortgage arm of Commercial Mortgage, is either sold or dissolved.

The D’Agostino family, which ran the company for decades, is no longer involved with the company. Anthony D’Agostino resigned in December after a heated meeting with creditors at which his leadership was called into question. His son, Michael, was the most recent president of the company, but he also has resigned. Kimberly Moore, who was the secretary of the company, will stay on to assist in the transition.

Although Anthony D’Agostino, his wife, Corrine, Michael D’Agostino and David Satek will remain shareholders of the company, it’s for tax purposes only. The four will not receive any proceeds from the company’s liquidation, according to the second amended-liquidation plan.

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

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