Posted 11:57 pm Thursday, December 06, 2012
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College’s auction of assets to proceed
Lon Morris College will be able to sell its remaining assets in January — about a month later than the original proposed date.
That’s after Judge Bill Parker with the United States Bankruptcy Court Eastern District of Texas on Wednesday gave the go-ahead for an asset auction on Jan. 14 at the offices of McKool Smith law firm in Dallas. An auction was originally proposed for Dec. 13. Parker also authorized the school for a $500,000 loan on an interim basis, despite an objection filed last week by the Texas Attorney General’s Office.
Tom Kelley, spokesman for the Texas Attorney General’s Office, said via email that the court agreed with attorneys in the office that the auction shouldn’t take place before Christmas. And although the court allowed Lon Morris’ motion to borrow $500,000, it can only borrow $150,000 now, and the Attorney General’s Office can still object to its borrowing the remaining $350,000, he said.
The loan will be used for things such as insurance, utilities, administrative fees and fees associated with the auction, according to testimony.
Assistant Attorney General Hal Morris on Wednesday asked the court not to approve the financing, saying that the office views it as a benefit to secured creditors and case professionals rather than the unsecured creditors.
But Dawn Ragan, chief restructuring officer for the Lon Morris bankruptcy estate, said the college must have the funds to help protect assets during this time. Additionally, she said she would not be able complete information for the U.S. Department of Education and different education organizations without the limited staff she has on campus, which includes a comptroller and an academic dean.
If utilities were shut off, there also likely would be mold in the campus buildings, and it would likely negatively impact the value of the assets “in a significant way,” she testified.
Other financing opportunities were sought, she said, but this loan was the best option.
That’s after Judge Bill Parker with the United States Bankruptcy Court Eastern District of Texas on Wednesday gave the go-ahead for an asset auction on Jan. 14 at the offices of McKool Smith law firm in Dallas. An auction was originally proposed for Dec. 13. Parker also authorized the school for a $500,000 loan on an interim basis, despite an objection filed last week by the Texas Attorney General’s Office.
Tom Kelley, spokesman for the Texas Attorney General’s Office, said via email that the court agreed with attorneys in the office that the auction shouldn’t take place before Christmas. And although the court allowed Lon Morris’ motion to borrow $500,000, it can only borrow $150,000 now, and the Attorney General’s Office can still object to its borrowing the remaining $350,000, he said.
The loan will be used for things such as insurance, utilities, administrative fees and fees associated with the auction, according to testimony.
Assistant Attorney General Hal Morris on Wednesday asked the court not to approve the financing, saying that the office views it as a benefit to secured creditors and case professionals rather than the unsecured creditors.
But Dawn Ragan, chief restructuring officer for the Lon Morris bankruptcy estate, said the college must have the funds to help protect assets during this time. Additionally, she said she would not be able complete information for the U.S. Department of Education and different education organizations without the limited staff she has on campus, which includes a comptroller and an academic dean.
If utilities were shut off, there also likely would be mold in the campus buildings, and it would likely negatively impact the value of the assets “in a significant way,” she testified.
Other financing opportunities were sought, she said, but this loan was the best option.
“We are extremely pleased that the court has approved this loan and cleared the way for what we believe will be a successful auction,” Ms. Ragan said in a news release. “The loan approved …will help maximize the value of the estate as we work toward satisfying the school’s creditors, which include more than 100 former Lon Morris College employees who have not yet been paid for their work.”
Hugh Ray III, attorney for Lon Morris, added in the release, “Today’s ruling means the bankruptcy court agrees with our position that this loan and the upcoming auction are the best options available to pay the college’s creditors by maximizing the value of the estate’s assets. Our goal is to make sure the creditors are paid what they’re owed, and everyone involved is working hard to make that happen.”
They are also preparing for the upcoming auction, which is costing an estimated $20,000 to $30,000 in additional money for marketing and re-advertising the date.
The auction will include about 50,000 square feet of lecture space, dorms, a technology center, a gymnasium and fields for football, baseball and other sports, according to a news release.
Lon Morris has agreed not to include athletic facilities and the Cooper House residence building, which Texas National Bank has liens on. The rodeo arena, which the City of Jacksonville deeded to Lon Morris in 2009, will not be sold without the city’s consent.
Ms. Ragan said Lon Morris originally proposed to have the auction Dec. 13, but it wanted to move the sale to January for the benefit of potential buyers that might have scheduling issues during the holiday season.
She said they also want the auction to be “for serious bidders.”
“We don’t want the perception where anyone can bid $1,000 for a $1 million asset,” she said. “You don’t want people who are not sophisticated or don’t have the financial wherewithal.”
She said Dallas was chosen because a big city would be more convenient for equity groups, and it would be more convenient than Houston for people in Tyler.
Stephen Karbelk, co-chairman and founder of AmeriBid, the company auctioning off Lon Morris assets, testified Wednesday that there has been “significant interest” from qualified bidders to use Lon Morris facilities for educational purposes.
Hugh Ray III, attorney for Lon Morris, added in the release, “Today’s ruling means the bankruptcy court agrees with our position that this loan and the upcoming auction are the best options available to pay the college’s creditors by maximizing the value of the estate’s assets. Our goal is to make sure the creditors are paid what they’re owed, and everyone involved is working hard to make that happen.”
They are also preparing for the upcoming auction, which is costing an estimated $20,000 to $30,000 in additional money for marketing and re-advertising the date.
The auction will include about 50,000 square feet of lecture space, dorms, a technology center, a gymnasium and fields for football, baseball and other sports, according to a news release.
Lon Morris has agreed not to include athletic facilities and the Cooper House residence building, which Texas National Bank has liens on. The rodeo arena, which the City of Jacksonville deeded to Lon Morris in 2009, will not be sold without the city’s consent.
Ms. Ragan said Lon Morris originally proposed to have the auction Dec. 13, but it wanted to move the sale to January for the benefit of potential buyers that might have scheduling issues during the holiday season.
She said they also want the auction to be “for serious bidders.”
“We don’t want the perception where anyone can bid $1,000 for a $1 million asset,” she said. “You don’t want people who are not sophisticated or don’t have the financial wherewithal.”
She said Dallas was chosen because a big city would be more convenient for equity groups, and it would be more convenient than Houston for people in Tyler.
Stephen Karbelk, co-chairman and founder of AmeriBid, the company auctioning off Lon Morris assets, testified Wednesday that there has been “significant interest” from qualified bidders to use Lon Morris facilities for educational purposes.
“We want the sale to be successful … and benefit the City of Jacksonville,” he said.
A detailed auction list can be found at www.ameribid.com.
The auction is one of the latest chapters in Lon Morris’ financial struggles.
The financially-strapped institution filed a voluntary chapter 11 bankruptcy petition in July after bleeding millions of dollars since at least the 2007-08 school year, when college representatives said the school embarked on a costly plan to grow enrollment.
In August, the college learned it would lose federal student aid and subsequently decided to suspend the fall semester. Ray has said that changed the nature of the case, which went from selling an operating facility to instead auctioning its assets as real estate.
About 100 students were expected to attend Lon Morris this fall, and other East Texas community colleges have stepped in to help accommodate them.
Per its responsibility to protect charitable assets, the Texas Attorney General’s Office also has been investigating how $1.3 million in a restricted gift was spent by Lon Morris, the agency confirmed.
The funds in question are from the James Long Endowment, which specifies that if Lon Morris College closes, the main library at Sam Houston State University in Huntsville becomes the beneficiary.
Additionally, the Texas Methodist Foundation filed a lawsuit early last month against Lon Morris and the Attorney General, wanting affirmation that five charitable endowments the foundation administers are not viewed as property of Lon Morris’ bankruptcy estate. According to the lawsuit, the endowments were created under wills or trust instruments before Lon Morris filed for bankruptcy. The lawsuit states that the bequests were made to the foundation, and the endowments were originally created to further “educational, charitable and religious endeavors of the Methodist Church and Methodism.” The endowment funds are about $265,000, according to the lawsuit.
In court documents filed earlier this week, the Attorney General’s Office states that it agrees with the Texas Methodist Foundation “that such trust assets are not assets of the bankruptcy estate.”
The Attorney General also agrees in the documents that “such assets must be distributed by a court of competent jurisdiction or as otherwise indicated in the instrument, in order to carry out the charitable purpose of the respective donor.”
A detailed auction list can be found at www.ameribid.com.
The auction is one of the latest chapters in Lon Morris’ financial struggles.
The financially-strapped institution filed a voluntary chapter 11 bankruptcy petition in July after bleeding millions of dollars since at least the 2007-08 school year, when college representatives said the school embarked on a costly plan to grow enrollment.
In August, the college learned it would lose federal student aid and subsequently decided to suspend the fall semester. Ray has said that changed the nature of the case, which went from selling an operating facility to instead auctioning its assets as real estate.
About 100 students were expected to attend Lon Morris this fall, and other East Texas community colleges have stepped in to help accommodate them.
Per its responsibility to protect charitable assets, the Texas Attorney General’s Office also has been investigating how $1.3 million in a restricted gift was spent by Lon Morris, the agency confirmed.
The funds in question are from the James Long Endowment, which specifies that if Lon Morris College closes, the main library at Sam Houston State University in Huntsville becomes the beneficiary.
Additionally, the Texas Methodist Foundation filed a lawsuit early last month against Lon Morris and the Attorney General, wanting affirmation that five charitable endowments the foundation administers are not viewed as property of Lon Morris’ bankruptcy estate. According to the lawsuit, the endowments were created under wills or trust instruments before Lon Morris filed for bankruptcy. The lawsuit states that the bequests were made to the foundation, and the endowments were originally created to further “educational, charitable and religious endeavors of the Methodist Church and Methodism.” The endowment funds are about $265,000, according to the lawsuit.
In court documents filed earlier this week, the Attorney General’s Office states that it agrees with the Texas Methodist Foundation “that such trust assets are not assets of the bankruptcy estate.”
The Attorney General also agrees in the documents that “such assets must be distributed by a court of competent jurisdiction or as otherwise indicated in the instrument, in order to carry out the charitable purpose of the respective donor.”
