July 27, 2011

Last October, the Bankruptcy Court approved a Chapter 11 Plan that contemplated new financing for its implementation. The original financing commitment fell through because the financer was not able to provide the funds. After diligent efforts over a period of several months, the Committee and the Funds were unable to confirm financing that would allow the Plan to go effective. Those efforts included engaging a broker to market the financing opportunity, and trying to raise money from existing holders of secured debt. Ultimately, financing proved unavailable.

In light of the inability to find financing, and after consultation with the Committee, the Court determined that the Plan could not be implemented and directed the appointment of a Chapter 11 trustee to take possession of all assets and take control of management. Richard M. Kipperman has been appointed as Chapter 11 Trustee for the CMR cases, and is now in charge of managing the assets of the Funds.   

We are working closely with the Trustee on two fronts. First, in order to obtain recovery of certain insurance proceeds, we are working toward a resolution of the class action filed against David Choo and CMR, Inc. ("CMRI"), the former manager of the funds, by members of the Committee. Second, we are working with the Trustee toward an orderly liquidation of the assets of the Funds that provides as much recovery to investors as possible under the current circumstances of the case.

THE TRUSTEE AND LIQUIDATION OF ASSETS

On April 14, 2011, the Court approved the appointment of Richard M. Kipperman as Chapter 11 trustee for the CMR cases. Mr. Kipperman is an extremely experienced bankruptcy trustee. The website for his company can be found www.corpmgt.com/about.html

The practical effect of Mr. Kipperman's appointment is that he has taken over all aspects of the management and operation of the Funds and their assets, including maintenance of their books and records. While CMRI is not in bankruptcy, as a practical matter we believe it has ceased business activities. This is reflected in the May 2011 Newsletter from CMRI to CMR investors.  To view the newsletter, please click here.

The Chapter 11 Trustee's Role

The Bankruptcy Code provides that a trustee may be appointed in a Chapter 11 case for various reasons. In this case, the Court ordered the appointment of the Trustee because it because clear that the Plan could not be implemented due to the lack of available financing.

A Chapter 11 trustee is responsible for managing the assets of the bankrupt company, and takes over all authority from the existing managers. In this case, the Trustee is now in charge the assets of the CMR Funds, and is responsible for liquidating them in an orderly fashion to provide as much return as possible to the Funds' creditors and investors.

Since his appointment, the Trustee has been very actively working to familiarize himself and his staff with the Funds and their real estate holdings, and analyzing the potential for returns to investors. The Trustee's view of the case is described in more detail in his Chapter 11 Trustee’s Status Conference Statement, which was filed with the Court on July 8, 2011. The Status Conference Statement includes an analysis of the CMR Fund's real estate holdings. To view the Status Conference Statement, please click here.

What is the Committee's Role Now That There is a Trustee?

The Committee will remain actively involved, in order to advocate for the interests of the investors. While the Trustee's duty is to all creditors of the CMR Funds, the Committee represents only the investors. We will continue to work closely with the Trustee in an effort to obtain as much return to investors as possible.

THE INSURANCE LITIGATION

The Bankruptcy Court designated the Committee to pursue claims the Funds might have against CMRI and David Choo. Members of the Committee filed a class action complaint against Choo and CMRI in an effort to recover proceeds from available insurance policies.  This action, which was filed on behalf of all the investors, was filed as an Adversary Proceeding in the Bankruptcy Court.  The complaint seeks to recover based on both claims of the all investors, and based on derivative claims that the CMR Funds have against the Choo and CMRI.

There are two applicable insurance policies, with total coverage limits of $8 million. Any recovery will ultimately be reduced by defense costs which are taken out of the policies. It is expected that any recovery would in part go into the estate, and in part be distributed directly to the investors.

What is happening now?

The Committee is working with the Trustee to seek a settlement that would recover as much of the insurance coverage as possible for the benefit of the bankruptcy estate and the investors. All parties are actively involved in settlement negotiations. We will keep you informed as to any further developments in future updates.

What happens next?

At this time we are still engaged in negotiations that include the Trustee, Choo and CMRI, and the insurance companies. We hope that this will result in a settlement that will return as much of the insurance policies as possible to the estate and the investors, however, litigation is always uncertain.

If there is a settlement agreement, it will have to be approved by the Bankruptcy Court as a class action settlement. In that event, all investors will be sent notice of the proposed settlement. This notice will explain all terms of the settlement, as well as how the settlement will affect you. You will have the opportunity to respond before the Court grants final approval of any settlement.

 

 

April 8, 2011

Update

On March 4, after several prior extensions of time, the Court instructed the Committee and/or the Funds to present by March 25, 2011, a binding agreement for a Plan implementation loan that would be made to the Wind-Down Trust .  As of that date, the financing source for the proposed loan advised the Committee and the Funds that mutually acceptable terms had not been agreed and no binding agreement would be entered into.

Accordingly, at a status conference held on April 4, 2011, to discuss the changed circumstances, the Court determined that confirmation of the joint plan of reorganization could not be finalized, and a Chapter 11 trustee will be appointed to continue the administration of the Chapter 11 case for the Funds.  On April 7, the Court entered orders reflecting its decisions on these matters.  Copies of the orders may be reviewed at the "Case Documents" link at the right of this page.

The Committee will continue to exist, and have input to the process, after the appointment of the Chapter 11 trustee.  The trustee will, however, be in control of the Funds, in place of CMRI.

The Committee will provide a further update after a trustee has been appointed by the Court, and the Committee has had an opportunity to confer with the trustee about the status of the Chapter 11 case, and the trustee's view of the options available to him or her under the Bankruptcy Code.

 

March 23, 2011

UPDATE:

On March 4, 2011 the Court held a hearing on the status of the joint plan of reorganization including efforts to obtain financing for that plan.  Counsel for the Committee advised the Court that a financing source had been identified and that the parties were negotiating over the terms of the borrowing.  The individual who will be providing the financing was in court and confirmed these facts for Judge Carlson.  The Court instructed the Committee and/or the Funds to present a binding agreement for a loan to the Wind-Down Trust by March 25, 2011.  The Court will hold a further status conference on April 1, 2011 at 2:00 p.m.

As a reminder, Schedule K-1's for investor accounts will be distributed by the CMR Funds (not by the Committee or McNutt Law Group).  Please contact CMR directly for any questions you may have about the Schedule K-1's.

 

January 27, 2011

Update

The Court held a hearing on January 14, 2011 regarding the status of the Chapter 11 Plan and the efforts to obtain financing for the implementation of the Plan.  The Court granted a further extension of the deadline for the Plan to go effective.  The new date is March 4, 2011.  In the meantime, the Committee will continue its financing efforts.  As noted in previous updates, we will post an update once the Effective Date occurs, and a notice will also be mailed.

Schedule K-1's for investor accounts will be distributed by the CMR Funds (not by the Committee or McNutt Law Group).  Please contact CMR directly for any questions you may have about the Schedule K-1's.

December 3, 2010

UPDATE

The Plan Effective Date is scheduled to occur by December 6, 2010.  However, arrangements for the necessary financing for implementation of the Plan will not be complete by that date.  The Committee and the Funds, therefore, have requested that the Bankruptcy Court extend the date by which the Plan can be declared effective.

At a hearing on December 3, the Court approved an extension of the deadline for the Plan to go effective to January 14, 2011.  In the meantime, the Committee will press forward with the financing efforts.  As noted in the October 22, 2010 update, we will send out an update once the Effective Date occurs, and a notice will also be mailed. 

 

October 22, 2010

Update

The Bankruptcy Court held its final hearing on the confirmation of the Chapter 11 Plan on September 22. At that hearing the Court indicated that it would confirm the plan, and on October 6 the confirmation order was entered on the docket. Pursuant to its terms, the Plan's effective date should occur within 60 days from October 6. We will post an entry to this site when the effective date has been set. We will mail a notice of effective date to all creditors and investors, and that notice will contain some important bankruptcy technical information.

When the Plan becomes effective, a number of administrative steps will take place. The most important of these is that the Wind-Down Trustee will take charge of the portfolio of properties that the Funds either own or have lien positions on. Many other administrative matters will need to be dealt with as well. Distributions to creditors will take place relatively early in the term of the Plan -- within six months of the effective date. There are relatively few creditors of the Funds, however. Distributions to investors will occur more slowly, and will depend on the experience in managing and liquidating the Funds' properties. There will be updates to the status as this process continues.



September 2, 2010

Update:

We are pleased to inform the investors that we continue to move towards confirmation of the Chapter 11 Plan. As of August 10, 2010, the Court had overruled all filed objections except for the one filed by Canpartners (the entity with which Fund I had been embroiled in litigation over the Hawaii investment).

At the August 10 hearing, the Committee and Canpartners advised the Court that preliminary discussions indicated there was a possibility of settling all disputes between the parties, ending the litigation and removing the one remaining objection to confirmation of the Chapter 11 Plan. With that information the Court set a hearing date for September 22 to address the settlement if one was reached, or if not then to address the objection. The Committee then began focused settlement negotiations with Canpartners.

The Committee and Canpartners ultimately reached a compromise. Under the compromise Canpartners would abandon its claim in the estate (which had grown to $5.8 million). In exchange the Funds agreed to end all litigation with Canpartners . The terms of that settlement were finalized yesterday, and the settlement is the subject of a motion filed on September 1 that will be heard by the Court on September 22nd. A copy of the motion papers can be found here. If the settlement is approved by the Court, then we are hopeful that the Plan will be confirmed shortly thereafter and that it will "go effective" no later than early-to-mid October. If the settlement is not approved then the Court is likely to set the matter for further hearings.

August 4, 2010

Update

 

This is a brief update on the  status of the balloting and plan confirmation process.  As you know, ballots for or against the Plan were due on July 28.  Of the equity investors who cast ballots over 91% voted in favor of the Plan.  All unsecured creditors who voted also voted in favor of the Plan.  A Ballot Tabulation summarizing the results of the voting has been filed with the Court.  A copy of the Ballot Tabulation is also posted in the documents section of this website.  Please click here.

 

Apart from the voting aspect, there were several formal objections filed to the Plan.  The Court held a status conference on July 30 to review those objections and determine the scope of the issues to be resolved.  The Court then set out a schedule for addressing the objections.  On August 4th the Court held a hearing to address objections.  We expect that a written ruling will follow.  The court has set another status conference for August 10 at which we will discuss what other argument or briefing, if any, will be necessary prior to a final ruling on confirmation of the plan.

July 20, 2010

REMINDER

 

This is a reminder that we will be convening an informational meeting regarding the CMR Bankruptcy Plan on Thursday, July 22, at 6 pm in San Francisco.  The meeting will be held at 301 Battery Street, 3rd Floor, San Francisco, CA. 

 

In response to requests by investors, we will also make the meeting available via teleconference.  The dial-in information is as follows:

 

Dial In:    218.862.6420
Passcode:   6296314

 

Please contact us at cmrcase@ml-sf.com with any questions.

 

 

July 7, 2010

Investor Meeting

 

UPDATE: As detailed in the packet mailed out to all investors recently, the Equity Committee and the Debtors will hold an informational meeting for investors in the Funds. At this meeting, investors will be able to direct questions about the Plan to representatives of the Equity Committee and the Debtors.  There will also be an opportunity for discussion of the Plan and whether it should be confirmed.  The meeting will be open to all parties having investments in any of the three Funds.

 

 

Please see the information below regarding the date, time, and location of the meeting:

 

Date:   July 22, 2010

Time:  6:00 p.m.

Location:   The Bar Association of San Francisco

301 Battery Street, 3rd Floor

San Francisco, CA  94111

Directions to Meeting Location