Bankruptcy Judge OKs Payment Plan for Investors in Pioneer Mortgage : Finance: Company now faces ruling on fees being sought by attorneys who have reorganized the bank since January, 1991.
A bankruptcy judge Thursday approved a complicated reorganization plan for Pioneer Mortgage, and bankruptcy attorneys are expected today to seek $3.9 million in payments from the cash-strapped company.
Investors have balked at that request because, to date, Pioneer has recouped just over $7 million from its $200-million loan portfolio using funds from 2,000 investors. Former Pioneer President Gary Naiman plunged the company into Chapter 11 bankruptcy proceedings in January, 1991.
Most of Pioneer’s loans disintegrated when California’s real estate market stalled. Investors have filed civil lawsuits alleging fraudulent behavior by Naiman, who reportedly is the subject of a continuing criminal investigation.
The plan approved by U.S. Bankruptcy Court Judge James Meyers on Thursday calls for La Mesa-based Pioneer to distribute its remaining assets to investors and creditors over five years.
Pioneer President Dennis Schmucker said on Thursday said that the company hopes eventually to recoup 35% of investors’ funds by carefully managing the company’s remaining loan portfolio.
Under the reorganization plan, funds will be returned to investors as loans are paid off or sales of loans are arranged, Schmucker said. For example, during the next three months, Schmucker hopes to resolve deals that will generate an additional $3.5 million that would be be turned over to investors.
But the handful of investors who attended Thursday’s two-hour session attacked the $3.9-million bill submitted by attorneys and accountants, who, for the most part, have not been paid for work completed since Pioneer entered bankruptcy proceedings. Meyers will determine how much those professionals eventually will be paid.
“They should settle for 25% of what’s available,” one irate investor said Thursday. “There’s not going to be anything left for us.”
So far, Meyers has approved payment of about $1.5 million in fees to attorneys and other professionals.
Schmucker disagreed with investors who view attorney fees as prohibitive.
“These professionals have, in effect, acted as Pioneer’s bank, by doing work for 18 months without being paid,” Schmucker said.
“Imagine going to an attorney, asking him to spend $3 million and ask him to wait for payment for 18 months or more,” Schmucker said. “That’s just not going to happen.”
Schmucker credited attorneys with bolstering the value of Pioneer’s loan portfolio by helping to safeguard loans that still retain value. With the attorneys’ efforts, investors and creditors “would probably be lucky to receive 10% of what they eventually will receive,” Schmucker said.
Last month, 99% of Pioneer investors endorsed the plan approved Thursday. Although a handful of creditors and investors objected to the plan, Meyers approved it, arguing that continued squabbling would “waste the assets of this estate.”
Meyers described the plan as making “the best out of a bad situation . . . this is not a happy case.”
“This is the most important day of the Chapter 11 proceeding” because Pioneer can now begin to make payments to investors, said Ali Mojdehi, an attorney who represents Pioneer’s official creditors committee.
