Lower Salford >> The bankruptcy case of developer Lower Salford-based TH Properties has been reopened by a federal bankruptcy court judge.
The ruling from bankruptcy Judge Stephen Raslavich was issued in response to a request from creditor H & K Group, formerly known as Haines and Kibblehouse, which alleged in court documents that TH sold a development meant to pay off bankruptcy debt without disclosing that sale to the court.
According to archive reports, TH Properties — formerly known as THP — filed for bankruptcy in April 2009, and over the next two years, the developer and its debtors, including H & K, worked out a plan for repayment of that debt with proceeds generated by future developments.
According to the motion filed by H & K, part of the settlement agreement stated TH would develop a property at 1770 Swamp Pike in New Hanover Township, known as the Wynstone Property, and “contribute proceeds generated from sales of homes there to increase the projected distribution to unsecured creditors by 50 percent.”
That plan was filed with the court in early December 2011, but on or around Dec. 29 of that year, the Wynstone project was sold to a separate developer, and that “sale was not disclosed in the plan at the confirmation hearing or in the confirmation order,” according to court records. H & K “uncovered this issue as a part of its ongoing business relationship with the debtors, and inquiries with regard to the Wynstone project,” according to court filings.
H & K filed to reopen the bankruptcy case in February, claiming the case needed to be reopened “to address the clear violations of the debtors which occurred when the Wynstone project was sold” in violation of the plan.
The motion to reopen the bankruptcy case was filed by H & K in February, and TH filed a response in March, according to court documents. In that response, “the reorganized debtors do not dispute the allegations contained in the motion,” but claim “the current management of the reorganized debtors was unaware of the lack of disclosure related to this transaction until recently” and remains under investigation.
Reopening the case, TH argued, could lead to “numerous negative consequences, including operational performance suffering, project developments being adversely affected, vendors losing confidence in [the firm’s] performance, and employee morale issues.”
That response was filed on March 18, and in a hearing the following week, Raslavich granted the motion from the creditors, reopening the case.
Since that date, updated transcripts of prior hearings have been filed with the court, and TH filed a financial report last week for the first quarter of 2015. In that report, TH lists disbursements of $421,950 in the first quarter, of which $420,000 is categorized as “administrative claims” and the rest as quarterly trustee fees.
In the report, the company also states that it is current on all post-confirmation plan payments and said no assets have “been sold or transferred outside the normal course of business, or outside the plan of reorganization,” during that reporting period.