Investor Questions Highlight Pioneer Mortgage Tangle
Pointed questions raised by a disgruntled Pioneer Mortgage investor during a two-hour informational meeting Tuesday underscored the difficult task facing Pioneer managers and creditors as they attempt to develop a plan of reorganization for the bankrupt company.
The investor’s comments were prompted by a growing debate over what Pioneer should do with the proceeds of $200 million in largely troubled real estate loans that the La Mesa-based mortgage banking firm arranged for 2,500 investors prior to entering U.S. Bankruptcy Court in January.
How those loan proceeds are eventually disposed of is important because a majority of the loans are no longer current, meaning that many investors aren’t likely to recoup their investments.
Pioneer’s official creditors committee in August recommended that U.S. Bankruptcy Judge James Meyers pool Pioneer’s good and bad loans prior to distributing proceeds to investors on a pro-rated basis. That “sharing concept” is driven by the “poor” condition of Pioneer’s loan portfolio, according to Ali Mojdehi, an attorney who represents the creditors committee.
But it was that proposal to “share and share alike” that prompted questions on Tuesday from the disgruntled investor.
“Why would anyone be stupid enough to want to share if their loans are good,” the investor asked during Tuesday’s meeting in Golden Hall. “Why would I want to share if all my loans were good?”
Later this year or early in 1992, Judge Meyers will be asked to rule on a plan of reorganization that will determine how proceeds of the loans will be distributed. The plan that eventually is adopted will mark an important step on the long road toward returning funds to Pioneer investors.
But Pioneer President Dennis Schmucker cautioned more than 200 investors at Tuesday’s meeting, which was sponsored by the Office of the U.S. Trustee, that it could take at least a year before funds begin flowing through to investors.
“The tough part here is trying to find (a plan) that is fair to everybody,” Schmucker said of the ongoing attempt to piece together a reorganization plan. “We probably can’t do that . . . so at the least, what we can do is give (investors) a choice.”
The preliminary plan proposed by the creditors committee, which has been endorsed by Schmucker, gives investors who disagree with the pooling plan the right to petition Meyers for individual consideration, Mojdehi said.
