IPI, committee of creditors aim to sell IPI hotel by year’s end

Imperial Pacific International (CNMI) LLC and a committee of its creditors have informed the NMI bankruptcy court that the goal is to sell the unfinished IPI hotel by the end of this year.

Last Friday, IPI attorneys filed a motion in opposition of the CNMI’s motion to convert IPI’s Chapter 11 Bankruptcy to a Chapter 7 Bankruptcy (which would essentially order liquidation of all IPI’s assets).

“IPI opposes the motion to convert case to Chapter 7 by the Commonwealth of the Northern Mariana Islands,” said the motion.

In its 34-page motion in opposition, IPI’s attorneys informed the court that IPI and a committee of its creditors have embarked on a process to sell the unfinished hotel casino with a goal to sell the hotel by the end of the year.

“Although this case was filed just two and half months ago, [IPI] and [the] committee have agreed to embark on a ‘363 sale process’ as the most efficient means of monetizing the hotel for the benefit of creditors. The debtor and committee have interviewed one potential investment banker/real estate brokerage. The debtor and committee anticipate the filing of a motion to approve a ‘stalking horse’ bid (subject to overbids) with the goal of selling the hotel by year end and filing a liquidating plan to pay creditors in their order of priority,” said IPI.

IPI’s lawyers argue that a Chapter 7 liquidation of its estate would be against the creditors’ best interests.

First, IPI’s lawyer states, liquidations always tend to be costlier and more time-consuming. Second, a Chapter 7 Trustee often does not have access to funds to properly maintain and secure an asset. Third, given the poor condition of the building and lack of funds to pay for security, a Chapter 7 Trustee could simply abandon the asset.

“Accordingly, conversion of this Chapter 11 case to a Chapter 7 case is not in the best interest of creditors and the estate. To the contrary, it is in the best interests of creditors to permit the debtor to swiftly move forward with a sale of the assets free and clear of liens, including tax liens and UCC-financing statements. Unsecured creditors who did not hire counsel (and have not appeared) should share in an equitable distribution,” said the motion.

IPI notes that a section 363 asset sale is a viable alternative to a reorganization.

“In fact, most chapter 11 cases are Section 363 ‘sale’ cases or involve liquidating plans. The Bankruptcy Code contemplates that a plan may call for the liquidation of the estate’s assets. The Debtor has made significant progress since the petition date. It has joined with the committee and will seek to sell the hotel to a buyer that can fund its completion. Conversion of dismissal of this case at this time is not in the best interest of the creditors or the estate. For the foregoing reasons, the debtor respectfully requests that the conversion motion and the U.S. Trustee’s joinder be denied,” said IPI.

Previously, the Commonwealth filed a conversion motion stating that cause exists to convert the case from Chapter 11 to Chapter 7 due to alleged continuing losses, no likelihood of rehabilitation, and lack of insurance. The Office of the U.S. Trustee joined in on the motion and has asked that the case be dismissed.

Last week, a committee of IPI creditors filed its own motion in opposition of the Commonwealth and the U.S, Trustees’ motion stating liquidation of IPI’s assets would not be in the best interest of IPI creditors.