Let’s make a deal
Bankruptcy filing updates for the Town of Mammoth Lakes
Once a bankruptcy is declared, it’s not unusual to see offers to creditors saying, “Let’s make a deal … we’ll buy your debt.” If you’re a creditor of the Town of Mammoth Lakes, which recently filed for protection under federal Chapter 9 Municipal Bankruptcy statutes, you can either wait for a check from the Town or take what’s behind Door #2. And behind that door is Sierra Liquidity Fund, LLC, an Irvine-based company, which just issued an Offer to Purchase Claims and Accounts Receivable due from the Town.
According to the prospectus, the offer on the table at the moment is only for claims that are for accounts receivable that were payable and/or due prior to the Bankruptcy Petition filing by the Town on July 3. It covers “GOODS” delivered to and received by the Town between June 14 and up to and including July 2.
Sierra Liquidity is offering 65% of the current amount outstanding, and is advertising pay off within 10 business days of receipt of transfer claims.
“The offer we have out now is for a certain type of claim,” said Pia Gullifer, the Sierra Liquidity’s Transfer Agent and Spokesperson. “It has to be GOODS, not labor, service, freight, etc. Everything else that is not in the date range and is not specifically goods will go into a different rate.”
Gullifer added that no offer for the other items has been put together as yet; but is forthcoming. The rate will be different for those, and based on an analysis of debt versus assets, including general secured and unsecured revenue. And expect the rate on those to potentially be a lot lower.
“A lot depends on the size and strength of the debtor. With a big company holding lots of assets, such as American Airlines, it could be 40%,” she said. “The Town of Mammoth could be much lower, perhaps as low as 5 or 10%, maybe 20% if they’re lucky.”
On the other hand, Sierra Liquidity has a lot of confidence in its ability to make something on its trade claim transfers. The fund and affiliated funds have, according to the company, purchased more than $150 million in illiquid assets from more than 20,000 firms and individuals.
The company is a small hedge fund, formerly a part of Riley Bower, Inc., a development company that’s been in existence for about 20 years. Sierra Liquidity was started as a spinoff company about 12 years ago, and since then has bought bankruptcy plans, usually Chapter 11 and Chapter 7 reorganizations.
It is one of only about 10 or so such funds in the state that specialize in this type of claims and accounts offers. Gullifer said the Chapter 9 offer regarding the Town is a unique one for the company, and so far has no plans to make similar offers to other state municipalities that have recently entered the Chapter 9 process, such as San Bernardino or Stockton.
The deal is contingent on the petition for Chapter 9 being accepted, and part of the prospectus pitch is that, even though the Town might be current on post-petition debt, it’s not allowed to pay certain pre-petition outstanding invoices until the Bankruptcy court approves a plan or reorganization.
“There’s risk involved, but if you do the research, it can be better than Vegas, better than the banks,” Gullifer said.
Meanwhile, Town Manager Dave Wilbrecht is scheduled to head to Los Angeles for a two-day series of court-ordered mediation meetings with its biggest creditor, Mammoth Lakes Land Acquisition, holder of $44 million in judgment and legal fee obligations against the Town. This will mark the first time the Town sits down to any sort of mediation with MLLA since the mediation process began in the spring. MLLA refused to participate in pre-Chapter 9 mediations the Town held with other creditors.
San Berdoo/Mammoth similarity
San Bernardino’s bankruptcy may provide Mammoth Lakes with some good ideas, vis a vis outsourcing city police and fire services. According to an item in the Digital Clipping Service’s County News, the city’s recent decision to file for bankruptcy protection has reignited the debate about whether the city, as a potential cost-cutting measure, should dissolve its police and fire departments and contract with the county for those services.
Last week, the City Council declared a state of fiscal emergency and directed staff to file for Chapter 9 bankruptcy protection.
Officials at the San Bernardino County sheriff’s and fire departments said San Bernardino city officials have not approached them on the subject of contracting with their agencies for police and fire services.
