Citizens Security Bank’s third-party reorganization plan for Ada’s Inc. faces judicial scrutiny when attorneys for all parties meet on Aug. 27 before Robert J. Faris bankruptcy judge at the U.S.District Court of Guam.
Attorney Joyce C.H. Tang partner in the law firm of Civille & Tang PLLC filed a First Amended Plan on behalf of Citizens Security Bank with the court on July 20. Under the CSB plan all property belonging to the Ada’s Inc. estate would remain with the estate. The plan’s success depends on a cash injection of $100 000 from Anthony P. Sgro and Agnes P. Sgro his mother and refinancing of three major loans with First Hawaiian Bank totaling $7.45 million. The plan said that Anthony Sgro will remain general manager and common share stock will be reissued to Agnes Sgro.
George M. Butler attorney at Butler & Telford Butler and Ada’s Inc. trustee opposed the plan and maintained that the plan will not work and all creditors must be paid. Court records stated that the plan will not work because the largest creditor in the bankruptcy First Hawaiian Bank will not refinance and wishes to be paid in full.
There is a dispute between First Hawaiian Bank and Citizens Security Bank as to whether First Hawaiian properly accelerated the loans and invoked the default rate of interest on the outstanding $7.45 million. Butler’s opposition to the plan stated all parties agree that if the default rate applies then there will not be sufficient cash flow to make full payment under the plan.
Also at the heart of the matter is the Dededo Pay-Less property which is leased to Payless Markets Inc. and secures a First Hawaiian Bank loan in the amount of $665 819. The trustee is seeking to sell this property and has listed it on the real estate market for $1.6 million.
Curtis Ching U.S. Federal Trustee in Honolulu whose job it is to oversee bankruptcy proceedings has filed a memorandum stating he saw inconsistencies and deficiencies in the Citizens Security Bank plan that do not comply with the law.
Court documents showed CSB submitted the third-party plan to reorganize on behalf of Equatorial Manufacturing Inc. which is an unsecured creditor owed $320.
Citizen’s foreclosed in January of this year on property known as Dededo Fitness Center in Dededo and promptly sold it to a new corporation called Fitness Solutions which court documents state belongs to Anthony Sgro.
Butler’s memorandum and opposition to the CSB plan stated that Paradise Fitness owes Ada’s Inc. $3 million and is behind on loan repayments and on leases for two facilities built on Ada’s Inc. land.
Tang said she did not feel it was appropriate to comment at this time. Butler said “ This is not something appropriately litigated through the press. There is a competent bankruptcy judge who will look at everything and see through it all and make his determination on the best course of action to take.”
All parties will be in court on Aug. 27 when a decision on how to proceed could be rendered in this 2-and-1/2-year-old matter. MBJ