Court Enters Order Setting Deadline for Agreement with RBS

On or about February 24, 2014, following a hearing on the Court’s prior Order to Show Cause, the Court issued an Order directing the Debtor to file a Notice on or before March 17, 2014, to indicate whether or not it has reached an agreement with RBS that it in good faith believes will allow it to submit a confirmable plan of reorganization.  If an agreement is not reached by March 17, the Order directs the United States Trustee to appoint a Chapter 11 Trustee on March 18, 2014.  As a result, the Debtor has three (3) weeks from the date of the Order to reach an agreement with RBS before a Chapter 11 Trustee is appointed to assume control of the Bankruptcy Estate. 

During the hearing on the Order to Show Cause, representatives of the Debtor indicated that certain non-debtor assets may be sold and a portion of proceeds set aside for plan payments, but there was no promise that creditors will be paid 100%.  Representatives of RBS indicated that they view this as the last chance to reach an agreement with the Debtor.

Committee Files Complaint to Recover Fraudulent Transfers

On or about February 11, 2014, the Official Committee of Unsecured Creditors (the “Committee”) filed a Complaint on behalf of the Bankruptcy Estate against FirstMerit Bank, NA (“FirstMerit”), Oz Gas Aviation, LLC, Richard M. Osborne, and Richard M. Osborne Trust seeking the recovery of alleged fraudulent transfers made by the Debtor on account of a loan between FirstMerit and the other parties for the purchase of an airplane.  The Committee had previously sought and received derivative standing from the Court to pursue said action in the amount of approximately $900,000.  With the Debtor currently unable to confirm a plan of reorganization, the claims set forth in the Complaint represent a potential recovery for the Bankruptcy Estate for the purposes of making distributions to creditors.  A Pre-Trial Conference is currently scheduled for March 27, 2014, at 9:30a.m. in the Erie Bankruptcy Courtroom.

Court Enters Order to Show Cause for Conversion of Case or Appointment of Trustee; Committee Granted Authority to Pursue Turnover Actions

On or about January 22, 2014, the Court entered an Order denying the approval of the Debtor’s 3rd Amended Plan and Disclosure Statement.  After an informal status conference conducted by the Court, the parties agreed that the Disclosure Statement could not be approved nor the Plan confirmed in light of the non-existence of a viable private sale of substantially all of the Debtor’s assets.  In conjunction therewith, the Court then issued an Order to Show Cause why the Chapter 11 Bankruptcy Case should not be converted to Chapter 7 or why a Chapter 11 trustee should not be appointed.  The Court cited the parties’ failure to bring the status of the case into issue as its reasoning for acting on its own under the circumstances.  A hearing is currently scheduled for February 24, 2014, at 10:00a.m. in the Erie Bankruptcy Courtroom.

Additionally, the Court entered an Order granting the Official Committee of Unsecured Creditors authority to pursue claims against Oz Gas Aviation, LLC and Richard M. Osborne based on certain insider advances that have not been repaid to the Debtor or that have otherwise been re-characterized as uncollectible.