JACK B. SCHMETTERER, Bankruptcy Judge.
Debtor in this Chapter 11 bankruptcy case has moved under 11 U.S.C. § 364(d) to borrow up to $4 million in exchange for a priming lien on its property. Center-Point Properties Trust ("CenterPoint"), Debtor's current secured lender, objects. For reasons discussed below, Debtor's Motion will be granted in part and denied in part. After the original ruling on this issue [Docket No. 744], Debtor moved to alter or amend the ruling [Docket No. 760], and the parties have fully briefed and argued that motion. The Amended Findings
Debtor's bankruptcy case has been found to involve single asset real estate, see 11 U.S.C. §§ 101(51B); 362(d)(3), and so it is proceeding on a fast pace toward a confirmation hearing in mid 2011. Debtor must demonstrate actual or imminent refinancing and development funds in order to show a feasible plan for hotel development.
Debtor first filed its pending Motion to enter into credit facility [Docket No. 371] on November 27, 2010. CenterPoint filed an Objection [Docket No. 391], to which Debtor filed a Reply [Docket No. 408], As discussed below, this Motion is critical to Debtor's effort to obtain credit needed for its development.
When Debtor first presented this Motion on December 10, 2010, it argued that an immediate hearing on the Motion was necessary because, among other things, it sought to borrow money to pay real estate taxes that were due the next Monday, December 13, 2010. Because fourteen days had not elapsed since service of the Motion, a final hearing could not be held that day. See Fed. R. Bankr.P. 4001(c)(2); Local Bankr.R. 4001-2(B). Instead, a preliminary hearing was held at which Debtor first had to show the usual standards required to obtain senior secured financing— inability to obtain credit otherwise and adequate protection of the existing lender's interest. See 11 U.S.C. § 364 and discussion below. Debtor also had to show for emergency relief that the relief it sought was necessary to avoid immediate and irreparable harm to the estate. See Fed. R. Bankr.P. 4001(c)(2); Local Bankr.R. 4001-2(B).
At the preliminary hearing, Debtor presented evidence in the form of testimony from three witnesses: Pamela Gleichman, its developer; Marc Nuccitelli, its financial advisor; and Gilbert Li, a representative of the potential lender. CenterPoint elected to reserve its cross-examination of these witnesses until the final hearing on Debtor's Motion. CenterPoint's counsel argued that CenterPoint would be ready and willing to pay Debtor's property taxes if Debtor could not, but they did not call any witness or present any evidence by testimony or documents to back that argument with an actual commitment. Of course, the argument of counsel is not evidence. In fact, CenterPoint did not present any evidence at all at that time.
After Debtor rested at that preliminary hearing, it was opined from the bench that Debtor could not otherwise obtain funds to pay its property taxes and that payment of those taxes was necessary to prevent immediate and irreparable harm to the estate. The matter was set on December 13, 2010, for entry of the order for emergency relief.
Final hearing on evidence presented in support of Debtor's Motion was held beginning on January 12, 2011. After resting, Debtor and CenterPoint submitted written argument in the form of post-trial proposed findings of fact and conclusions of law.
After the hearing had concluded, Coman & Anderson, P.C., filed an additional objection, arguing that its previously allowed administrative expense claim should be paid along with all other administrative expenses out of the proposed post-petition loan.
Based on evidence presented, the following Findings of Fact and Conclusions of Law are made and will be entered.
Debtor owns two parcels of choice real estate located adjacent to McCormick Place in the City of Chicago as well as a long-term lease of 450 parking spots in the McCormick Place parking garage. Although the properties are mostly vacant and generate very little income, Debtor plans to develop a hotel complex there that will serve the needs of people using and visiting McCormick Place. After an evidentiary hearing earlier in this case on CenterPoint's motion for relief from the automatic stay, it was determined that the value of Debtor's property was $81,150,000 based on a finding that the highest and best use of the property will be for a fine hotel. In re Olde Prairie Block Owner, LLC, No. 10 B 22668, 2010 WL 4512820, at *4 (Bankr.N.D.Ill. Oct.29, 2010). Center-Point has opposed Debtor's attempt to reorganize at many stages of this bitterly contested case.
Karl Norberg is Debtor's Manager. His wife Pamela Gleichman is Debtor's Developer and has signing authority to contract on Debtor's behalf.
CenterPoint is Debtor's only secured lender, having advanced a loan to Debtor in 2008 that was secured by a mortgage on Debtor's property. The loan matured on February 21, 2009, but Debtor defaulted and CenterPoint filed a foreclosure action in state court on February 24, 2009. That proceeding was never resolved because it was interrupted by Debtor's bankruptcy filing on May 18, 2010. In its Proof of Claim filed in the bankruptcy case, CenterPoint asserts a secured claim of about $48,000,000. Given the property value found, Debtor has been found to have an equity cushion over the CenterPoint debt of more than $30 million.
JMB Capital Partners LP ("JMB") is Debtor's proposed new lender. Debtor negotiated an arms-length agreement with JMB for a relatively small loan of up to $4 million. In exchange, Debtor proposes to grant JMB (1) a new senior lien on its property that would prime CenterPoint's lien and (2) a "superpriority" administrative expense.
Coman & Anderson, P.C., is a law firm that represented the receiver that was appointed
Debtor's goal in obtaining the loan from JMB is to fund steps to make its project more attractive to potential lenders and investors that might advance funds to Debtor at confirmation. This includes taking steps to access benefits from a tax increment financing district encompassing Debtor's property, obtaining various tax credits, generating reports needed to further the development project, and generally managing the property toward hotel development.
Tax increment financing ("TIF") is a government program under Illinois law designed to encourage investment in particular locations. The amount of money available in a TIF district is tied to the taxes generated in that district. When property is located in a TIF district, the owner may apply to the local government for financing out of the TIF district funds for redevelopment projects. Applicants must typically demonstrate that they have a viable development plan and access to other sources of funding that the TIF financing will complement. Where this source of relatively cheap and safe financing becomes available, potential lenders and investors are more likely to be interested in development projects for affected property.
Here, part of Debtor's property is located within an established TIF district. Debtor contends that it could realize an increased property value of $55 million from that TIF district, a district in which it is the sole potential beneficiary, if it can get a TIF plan approved. This estimate is based on a calculated present value of expected future tax revenue in that TIF district. While that calculation is somewhat speculative, it seems certain that success of this effort would materially enhance market value of Debtor's property and therefore increase its chances to finance the hotel project. Before Debtor can gain approval of its TIF plan, however, it had and still has much work to do.
First, Debtor had to ensure that its TIF district would remain viable and accessible. That TIF district had apparently expired prior to the final hearing on Debtor's financing motion, so Debtor hired various consultants to lobby the Illinois General Assembly to extend the life of the TIF district so that Debtor could access funds in the future. That effort in the Illinois legislature was successful, and the TIF district now remains potentially accessible to Debtor.
Second, in order to access TIF funds, Debtor will need to complete a long and cumbersome application process. That process involves submitting various plans and reports to the City of Chicago, demonstrating that there is a viable project, and negotiating with the City for approval of an acceptable development plan. This will be both time-consuming and complex, so Debtor will need to hire consultants to shepherd the project through the necessary process. Debtor hired its consultant,
Debtor is also taking steps to obtain and monetize various potential tax credits. Success in these efforts would likely enhance the value of Debtor's property and attract further investors and lenders.
First, there are "historic tax credits," which are federal income tax credits that might provide a 20% credit for certain expenditures for rehabilitation of historic structures. Debtor is eligible for these tax credits because one of the buildings on its property, the American Book Company Building, has been designated on the National Register. Debtor has hired a consultant, Midwest Chicago, LLC, that is available to work with Debtor to ensure that Debtor's development plans maximize the potential value of the tax credit. These credits, if obtained, would likely help attract investors who might benefit thereby.
Second, Debtor is pursuing "new market" federal tax credits, which are designed as an incentive to generate and provide private investment capital (in the form of debt or equity) to businesses that serve low-income communities or target populations. Debtor contends that it is eligible for these credits because the prospective hotel would be located adjacent to a targeted community and would provide jobs for that community. Like the other public funding sources Debtor is pursuing, the process for obtaining the new market tax credits is complex. Debtor has consulted with an attorney who specializes in the area, Alan Kennard of Wildman Harrold, and wishes to retain his services in pursuing these credits.
Debtor contends that these tax credits would add value of more than $20 million to its property and hotel project. Once again, that estimate is somewhat speculative, but it must be said that success in obtaining tax credits would materially enhance the property value.
Debtor also proposes to use some JMB loan proceeds to take other steps that will enhance the value of its property. Among other things, it proposes to: (1) commission a new environmental report to replace its current outdated report, a step that will be required by any prospective lender; (2) retain legal counsel to assist it in its planned development by, for example, helping with TIF and zoning issues or reviewing consultant and vendor contracts; and (3) pay future real estate tax installments as they become due (the next installment of which will be due on April 1, 2011).
Debtor seeks to borrow at least $3,245,417 from JMB. The following is a list of entities that Debtor proposes to pay out of the JMB loan proceeds, along with a summary of the services provided or to be provided and the amount proposed to be paid:
14. Marcus, Clegg & Mistretta ("MCM"). Debtor wants MCM to assist with general legal work, including the review of consultant and vendor contracts. MCM's contract is with Norberg, personally, as Manager of Debtor. Debtor proposes to pay MCM $55,000, including $20,000 for services already performed and $30,000 for future services.
15. Walker Wilcox. Walker Wilcox has performed a number of different tasks relating to the foreclosure case and has provided background information relating to the claim objection involving CenterPoint. Debtor proposes to pay Walker Wilcox $21,000, all for services already performed.
16. Ungaretti & Harris, LLP. Ungaretti is Debtor's general bankruptcy counsel. As a result of the firm's legal work in this case, Debtor has been able to continue its efforts to develop its real estate assets and reorganize its business. Debtor proposes to pay Ungaretti a total of $800,000, including $424,273 for services already performed and the remaining amount for future services. Gleichman and Norberg have guaranteed Ungaretti's fees.
17. Righeimer, Martin & Cinquino ("RMC"). Leo Cinquino, a partner at RMC, was approved as an additional bankruptcy counsel. Cinquino has assisted Debtor in several aspects of its case, including an earlier condemnation proceeding relating to part of Debtor's property, as well as through business advice to Debtor. Debtor seeks his continued help to develop its real estate assets and reorganize its business in this bankruptcy case. Debtor proposes to pay RMC $200,000, including $120,000 for services already performed and $80,000 for future services.
18. CRT Capital Group LLC. CRT is Debtor's financial advisor and investment banker. CRT has canvassed the market and communicated with numerous investors who invest in projects and developments of this type and size, including debt (to finance both emergence from bankruptcy and the development project going forward) and equity sources. Through these efforts, CRT identified JMB as a post-petition lender and as a possible source of exit financing and equity for the project. Debtor seeks to pay CRT $235,000, including $110,000 for services already performed and $125,000 for future services. Norberg has guaranteed CRT's fees.
19. Ostrow Reisen Berk & Abrams. Ostrow Reisen is an accounting firm. The parties did not discuss the firm at all in their post-trial filings, other than to dispute whether it should be employed as a professional by the estate before the JMB loan is approved. It is not clear what services the firm will provide to Debtor or how the services it will provide will advance Debtor's ability to reorganize. Indeed, at trial it appeared that Ostrow Reisen would be preparing tax returns for two of the Debtor LLC's members, but not for Debtor itself. Moreover, Ostrow Reisen is the only creditor other than CenterPoint to file a Proof of Claim in this
20. General and Administrative Expenses. Debtor also seeks to use funds from the proposed JMB loan to fund its operations. Specifically, Debtor seeks to pay up to $200,000 for office rent at an unspecified location, salary for an office assistant, office supplies and expenses, insurance, computer and telephone services, and utilities. Debtor does not explain where and how it obtained these services and facilities in the past, and it may be that Debtor has thus far been operated out of Gleichman's home.
Further factual matters described in the Conclusions of Law will stand as additional Findings of Fact.
A debtor-in-possession may obtain credit or incur debt only as provided in § 364 of the Bankruptcy Code, Title 11 U.S.C. The standards that a debtor must meet under § 364 depend on the type of credit it seeks to obtain. A debtor may obtain unsecured credit in the ordinary course of business allowable as an administrative expense without a hearing or court approval, unless the court orders otherwise. 11 U.S.C. § 364(a). A debtor may obtain unsecured credit outside the ordinary course of business only with court approval after notice and a hearing. Id. § 364(b). If a debtor is unable to obtain unsecured credit, a court may authorize the debtor, after notice and a hearing, to obtain credit: (1) with priority over other administrative expenses (sometimes referred to as "superpriority" administrative expenses); (2) secured by a lien on unencumbered estate property; or (3) secured by a junior lien on encumbered estate property. Id. § 364(c). Finally, a debtor can obtain credit secured by a senior or equal lien on encumbered estate property (sometimes referred to as a "priming lien") with court approval and after notice and a hearing only if: (1) the debtor is unable to obtain credit otherwise and (2) the interest of the creditor to be primed is adequately protected. Id. § 364(d).
By their terms, these statutory standards do not require inquiry into a debtor's proposed use of the funds. However, should authority to borrow be granted, the funds would be property of the estate and subject to usage limitations set out in 11 U.S.C. § 363. Under that provision, a debtor may use or sell estate property outside the ordinary course of business only after notice and a hearing. Id. § 363(b)(1). In determining whether to approve such a use or sale, various standards have been used, "including a business judgment test, a good faith test determining whether the [use or] sale is fair and equitable, and a test to assess whether the transaction is in the best interest of the estate." In re Zeigler, 320 B.R. 362, 381 (Bankr.N.D.Ill.2005) (internal citations omitted). "The Seventh Circuit Court of Appeals has stated that there must be an `articulated business justification' for the [use or] sale." Id. (citing In re Schipper, 933 F.2d 513, 515 (7th Cir.1991)).
Here, Debtor seeks to obtain credit from JMB in exchange for a priming lien on property encumbered by CenterPoint's lien, a lien on any of Debtor's property that is not already encumbered, and a superpriority administrative expense
It is not enough for Debtor to rely on a large equity cushion resting on expert opinions as to value of its property even when, as in this case, the property is close to Lake Michigan at one of Chicago's most vibrant locations next to McCormick Place. A large equity cushion is not a debtor's piggy bank, and the uses contemplated for the new loan must have serious likelihood of benefitting the property and advancing the purposes of reorganization. A priming lien without such a showing would impose an unwarranted burden on the secured creditor if reorganization fails.
A debtor will sometimes provide adequate protection of an interest in estate property by: (1) making cash payments to the affected entity to the extent its interest decreases in value; (2) providing to the entity an additional or replacement lien to the extent its interest decreases in value; or (3) granting some other relief that will allow the entity to realize the "indubitable equivalent" of its interest. 11 U.S.C. § 361. The purpose of adequate protection "is to insure that the creditor receives the value for which he bargained prebankruptcy." In re O'Connor, 808 F.2d 1393, 1396 (10th Cir.1987).
However, a large equity cushion in the form of property value has also been found to provide adequate protection in some circumstances. See In re Aaura, Inc., No. 06 B 01853, 2006 WL 2568048, at *2 (Bankr.N.D.Ill. Sept.1, 2006) (citing In re James Wilson Assoc., 965 F.2d 160, 171 (7th Cir.1992); In re Markos Gurnee P'ship, 252 B.R. 712, 716-17 (Bankr. N.D.Ill.1997)). When a debtor seeks to prime an existing creditor, it must also show that the creditor's interest is not being jeopardized, considering "all of the relevant facts, with a particular focus upon the value of the collateral, the likelihood that it will depreciate or appreciate over time, the prospects for successful reorganization of the Debtor's affairs by means of the Plan, and the Debtor's performance in accordance with the Plan." In re Strug-Division LLC, 380 B.R. 505, 513-14 (Bankr.N.D.Ill.2008) (quoting In re Aqua Assoc., 123 B.R. 192, 196-97 (Bankr. E.D.Pa.1991)). A debtor's use of credit obtained through a priming lien must be likely to benefit the estate and improve the debtor's ability to reorganize. See id.; In re 495 Cent. Park Ave. Corp., 136 B.R. 626, 631 (Bankr.S.D.N.Y.1992); In re Mosello, 195 B.R. 277 (Bankr.S.D.N.Y.1996) (finding potential increase in value from Chapter 11 debtor's property development plans too speculative to adequately protect mortgagee's undersecured interest in debtor's property).
In this case, it was earlier found from expert testimony that Debtor's property has a value of $81,150,000. Since Debtor's debt amounted to approximately $48.7 million as of July 7, 2010, when CenterPoint filed its Proof of Claim, the property value found represents a large equity cushion. While accepted methods were used with expert opinion to value the property, those sources are only a substitute for testing the market to obtain actual sales or funding. Nonetheless, it is clear here that CenterPoint's security interest in Debtor's
CenterPoint argues that Debtor admitted at one point that its property was worth only $30 million. The basis for this argument is an inference CenterPoint derives from some unclear statements in a presentation that Debtor had prepared and that was admitted into evidence as Debtor's Exhibit 65. However, that document was an old presentation that did not contain the most current information. In addition, the presentation contained an explicit statement that Debtor valued its property at $93 million, not $30 million as CenterPoint argues. Finally, the value found here after a full evidentiary hearing at which experts for both sides testified was $81,150,000, In re Olde Prairie Block Owner, LLC, No. 10 B 22668, 2010 WL 4512820, at *4 (Bankr.N.D.Ill. Oct.29, 2010), and that value must be accepted until new evidence shows the contrary.
Relying on In re Swedeland Development Group, 16 F.3d 552 (3d Cir.1994), CenterPoint also argues that its interest cannot be adequately protected because there is no tangible evidence that the financing will actually increase value of Debtor's property. In Swedeland, the debtor property developer sought post-petition financing in the form of a priming lien to obtain working capital to fund ongoing construction. 16 F.3d at 556-57. The debtor argued that its secured creditor was adequately protected because the completed development "would generate a positive cash flow, the residential units could be completed and sold, and the completion of the project by the end of the century would result in [the secured creditor] being paid in full." Id. at 557. On appeal, a panel of the Third Circuit found that this was not adequate protection because the future profitability of the enterprise was entirely speculative in that case. Id. at 563-67.
CenterPoint's reliance on Swedeland is not appropriate. It is found and held here that CenterPoint's interest is sufficiently protected by the substantial equity cushion demonstrated by the value found in Debtor's properties. While the proposed expenditures are likely to increase property value that would provide additional protection, the amount of such possible increase in value is speculative and dependant on market factors, and is not relied on here to determine adequate protection of CenterPoint's interest. It can, however, be said that to the extent the security is likely to be benefitted, the burden on CenterPoint of a priming lien is likely to be mitigated.
Allowing a priming lien should be considered with caution to avoid transferring the entrepreneurial risk of failure by Debtor's investors and principals onto the secured creditor CenterPoint. Given the inherent uncertainty of determining valuation through methods commonly used by experts in appraising real estate, some restraint in allowing priming liens to fund particular expenses is warranted.
Debtor has shown that most of the expenses it seeks to fund with proceeds of its proposed borrowing will likely advance the value of the estate property and make it easier for Debtor to reorganize. First, Debtor has been taking steps towards acquiring funds from the TIF district, as well as various tax credits for which it is eligible. These government funding sources may be monetized and, if so, that would likely attract potential investors and
Debtor has also shown under § 363(b) and (c) that it has a serious articulated business justification for most of the proposed uses of the requested loan, regardless of whether they are inside or outside the ordinary course of business, and that those uses are in the best interest of the estate. Moreover, tax credits and government assistance that Debtor seeks are tied to the proposed development and use of the property, not to other possible interests of Debtor, and will likely benefit whoever owns Debtor's properties in the future. Considering all relevant factors, it is concluded that CenterPoint's collateral would not be jeopardized by allowing a priming lien.
For most of Debtor's proposed expenses, Debtor has shown that it is unable to obtain unsecured credit allowable under § 503(b)(1) as an administrative expense or allowable only under § 363(c)(2), (c)(3), or (d) on more favorable terms and conditions than those provided by JMB. For those expenses, Debtor is unable to obtain credit without granting JMB the terms it demands. However, Debtor has obtained unsecured credit for some of the proposed expenses. Indeed, some vendors have already provided services on retainers paid by Gleichman or some other person, on an unsecured basis or otherwise. Although the vendors for those expenses may have performed valuable services to Debtor's estate, permitting Debtor to borrow from JMB in exchange for a priming lien in order to pay past due expenses would be contrary to the plain language of the requirements under § 364(d).
In its Motion to Amend the original Order, Debtor seeks further authority to pay JMB's costs and expenses relating to the proposed loan. Debtor did not present evidence on this subject at trial, but now seeks blanket permission to pay those costs and expenses, "including, but not limited to, accrued attorneys' fees of $548,912.48, for, among other things costs and expenses relating to reviewing and responding to oral and written discovery requested by CenterPoint." Such expenses are commonly required by lenders, but here Debtor and JMB cannot yet obtain approval of them for two reasons. First, no evidence was offered as to the reasonableness and necessity of the expenses sought to be approved. Second, attorneys for both JMB and Debtor contended expressly at the final oral argument on Debtor's Motion to Amend that no evidence need be offered and that CenterPoint has no right to review evidence as to the requested expenses and that it should be given no opportunity to question them.
While Debtor and JMB offered to submit JMB's attorneys' fees and expenses to Court review and approval without evidence, they have thus far stood firm on their position that CenterPoint should not be allowed to challenge those expenses before loans to pay them would prime its
For these reasons, Debtor will be permitted to borrow from JMB only those amounts necessary to fund approved future services—that is, services rendered after on January 1, 2011—provided under contracts with the Debtor. Jurisdiction will be reserved to consider additional expenses on notice of motion and hearing with evidence is presented as to the necessity, reasonableness, and usefulness thereof.
CenterPoint argues that several of the payees that are attorneys or accountants cannot be paid from the requested JMB loan proceeds. However, that argument lacks merit.
First, CenterPoint argues that several payees that are law firms or accountants must be employed under 11 U.S.C. § 327 and must file fee applications before the JMB loan can be approved. Section 327 does not necessarily apply to all accountants and lawyers. See In re Renaissance Residential of Countryside, LLC, 423 B.R. 848, 856-58 (Bankr.N.D.Ill.2010). However, even assuming that § 327 will apply to professionals who are sought to be employed, Debtor can still be authorized to borrow funds from JMB without authority to pay those funds out to the professionals until they have been employed and have submitted proper fee applications. In other words, failure as of yet to be employed under § 327 or to submit a fee application is not a bar to Debtor borrowing money to pay properly employed professionals and other attorney and accountant payees in the future.
Second, CenterPoint argues that proceeds of the JMB loan will result from a disposition of its collateral, and therefore those proceeds would be its cash collateral which Debtor cannot use without its consent or court order. However, as discussed above, CenterPoint's interest in Debtor's property is adequately protected by the large equity cushion. This cushion exists regardless of whether it is in the form of cash or unencumbered real property, and it provides adequate protection for use of loan proceeds even when viewed as cash collateral.
Third, CenterPoint argues that payment to attorneys and accountants would be an impermissible charge against its collateral to pay general estate administrative expenses. Under 11 U.S.C. § 506(c), a debtor-in-possession "may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim, including the payment of all ad valorem property taxes with respect to such property." However, Debtor is not seeking to charge CenterPoint's secured claim under § 506(c) for preservation expenses. Instead, Debtor seeks to borrow additional funds from the unencumbered equity in its property in order to further its reorganization efforts. A secured creditor "has no right to fence off the entire collateral in which it has an interest so that no other creditor can get at it. Its only entitlement is to the adequate protection of its interest."
The Bankruptcy Code offers some protections to lenders who advance post-bankruptcy credit to debtors. Specifically,
11 U.S.C. § 364(e).
Debtor and JMB negotiated the proposed loan in good faith and at arm's length. The terms and conditions of the proposed loan are the best available under the circumstances, reflect Debtor's exercise of prudent business judgment consistent with its fiduciary duties, and are supported by reasonably equivalent value and consideration. The proceeds of the proposed JMB loan will be extended in good faith and for valid business purposes and uses, so JMB is entitled to the full protection and benefits of § 364(e).
By separate order, Debtor will be authorized to obtain credit in return for a priming lien on Debtor's property that is encumbered by CenterPoint's lien, liens on Debtor's unencumbered property, and a superpriority administrative expense claim, but only to the extent Debtor has not already obtained credit and to the extent the payee's services will provide a benefit to the estate. Specifically, Debtor will be authorized to borrow from JMB on terms requested only enough to net a total of $2,007,639, which may be used to pay only the following providers up to the following amounts for purposes described hereinabove:
Debtor will not be authorized to borrow from JMB funds that would be used:
One final comment to explain the Amended Order being entered. Debtor and JMB ask that terms of a forty-six page financing agreement be fully incorporated by reference. It contains the usual series of protections that hog tie Debtor and forestall any other claims or rights by third parties or Debtor. Similar contracts between debtors and lenders of new loans are usually approved as negotiated so long as they do not impair third party rights. However, the JMB loan is not a new first mortgage, but is rather a priming lien. Only certain terms therein are incorporated in the Amended Order allowing a limited priming loan. Some other proposed provisions are not.
JMB is receiving a priming lien on prime Chicago lakefront property worth a great deal more than its present loan, as well as a superpriority administrative expense claim. It has absolute discretion whether or not to loan or to pay any of the approved expenses. Other provisions that overly burden CenterPoint and give total control of the bankruptcy case to JMB are not approved.
An Amended Order in accord with the forgoing will separately be entered.
