Pacesetter to Exit Bankruptcy Next Month, Begin to Repay Creditors
Developer John Klug put his Pacesetter family of companies into bankruptcy reorganization at the peak of Orange County’s recession in 1993 and appeared to fade away. The bankruptcy filing listed debts of $44.4 million and assets of $32.4 million.
But on April 15, a restructured Pacesetter Investment Co. will emerge from bankruptcy as the owner of 250,000 square feet of industrial and retail buildings in Lake Forest, an 81-unit apartment complex in Anaheim and a $2.5-million stake in five housing developments in Orange County and Las Vegas.
Secured creditors of the original publicly traded companies--Pacesetter Homes Inc., Pacesetter Business Properties and American Pacesetter, which owned the now-defunct San Clemente Savings & Loan--will get almost all of their money back under a reorganization plan that was completed in February.
The payments, however, will be made over a number of years. The companies are being released from federal Bankruptcy Court on April 15, said their attorney, Marc J. Winthrop of Irvine.
About 40 unsecured creditors who were owed $6.2 million will receive 50% ownership of the new, privately held Pacesetter Investment in Irvine as well as $1.7 million cash, said the company’s president, Steven R. Strauss. He and Klug, who will be chairman of Pacesetter Investment, will own the other half of the company.
Strauss said the $2.5 million that the company has invested as an equity partner in five housing developments came from personal funds, from monies left in the original Pacesetter companies after reorganizing and from cash flow from the income properties the company still controls.
Had Pacesetter been required to use the cash and other assets to make larger cash payments to creditors, Strauss said, the company would not have survived and the amount of debt ultimately repaid would have been less.
“Allowing money to stay in the company and giving the creditors a stake in the company could give them a profit,” Winthrop said.
