Unsecured creditors could get money back from EpiCentre

Unsecured creditors owed money by the EpiCentre's developer could end up being paid all of what they are owed - a rarity in a real estate bankruptcy case, experts say.

Attorneys for the entertainment complex, its developers, the lender and others met in federal court Thursday to continue working toward an end to the ongoing bankruptcy case. The EpiCentre's developer filed for Chapter 11 bankruptcy protection in July 2010 to stave off foreclosure attempts by its lender.

On Thursday, Travis Moon, an attorney for the trustee appointed to oversee the project, told the court that he expected the bankruptcy case would be "a 100 percent case," slang meaning "people are going to get paid," said Dennis O'Dea, the attorney for the committee of unsecured creditors.

The debtor is expected to present a reorganization plan to U.S. Bankruptcy Court Judge George Hodges next month. As part of that plan, O'Dea said, the project's lender, Blue Air 2010, seems willing to let more money go to the unsecured creditors.

O'Dea said creditors are owed between $5 million and $9 million.

"It's quite unusual in real estate cases that people who provided goods and services to the debtor get some money back," he said. "General creditors are usually just kind of swamped by the tide in the fight between the giants (the developer and lender)."

The uptown project has been mired in court battles since the original lender, Regions Bank, started foreclosure proceedings in July 2010 after the loan came due.

Shortly after Regions started to foreclose on the property, the two limited liability companies that own the EpiCentre, Pacific Avenue and Pacific Avenue II, filed for bankruptcy protection, stalling the foreclosure. Regions Bank then filed documents questioning how developers Afshin Ghazi and George Cornelson spent their loan money and kept records. "The integrity of the Debtors' financial records, and the earning power of the EpiCentre itself, must be established, " Regions Bank wrote. Ghazi and Cornelson denied claims of self-dealing.

That case was dropped after Regions in November sold the $93.9 million construction note to Blue Air 2010, a limited liability company. Ghazi also agreed to transfer assets owned by the EpiCentre to Blue Air.

Last fall, shortly before a reorganization plan was expected to be approved, Blue Air accused the defendants of wrongfully diverted money from the project before filing for Chapter 11 and in engaging in self-dealing.

Among other claims, it says the defendants changed or backdated leases to eliminate obligations owed by affiliated companies. Blue Air, for example, says in its filing the defendants wrongly removed from the books $800,000 in back rent owed by Ghazi-controlled EpiCentre Theaters Partners LLC. Blue Air also claims valuable contracts were transferred to a Ghazi-affiliated company on the eve of the bankruptcy filing.

The EpiCentre sits at College and Trade streets on the site of the old convention center, which was abandoned for years. City officials have viewed it as an important part of uptown's redevelopment.

A reorganization plan is expected to be presented to U.S. Bankruptcy Court Judge George Hodges next month.