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TYLER, TX (KLTV) -
The Hon. Bill Parker of the U.S. Bankruptcy Court for the Eastern District of Texas has ruled in favor of the Lon Morris College bankruptcy estate by giving interim approval for a $500,000 debtor-in-possession loan to help complete the sale of the school's remaining assets.
Lon Morris' attorney, Hugh Ray, is calling Wednesday's bankruptcy hearing a "tremendous victory" after the Attorney General's objection to deny an additional loan was overruled.
Lon Morris asked the judge to authorize a Credit Agreement to borrow up to $500,000 in principle amount of post-petitions financing to be used, according to the budget agreed to between the parties.
The Chief Restructuring Officer Dawn Ragan said that money would be used to pay employees, utilities, professional fees and insurance on the college's property.
"We are extremely pleased that the Court has approved this loan and cleared the way for what we believe will be a successful auction," says Dawn Ragan of Austin, Texas-based Bridgepoint Consulting, the chief restructuring officer for the school's bankruptcy estate. "The loan approved today will help maximize the value of the estate as we work toward satisfying the school's creditors, which include more than 100 former Lon Morris College employees who have not yet been paid for their work."
Ragan said the money is also needed to pay costs that have already occurred. Ragan stated that she reduced her time and did not charge for part of her time so the debt would be lowered.
Hal Morris with the State Attorney General's Office said the college has no revenue to repay the $500,000 loan and asked the judge not to approve the financing and dismiss the case.
Ultimately, the judge sided with the college in their argument that by denying the loan, it would irreparably harm the college. So, the judge approved a $150,000 loan during the interim period, which Ray said is 14 days.
The State Attorney General's Office also argued that the date of the auction, which was originally scheduled to take place at 11:00 a.m. on December 13, 2012 at the Dallas offices of McKool Smith, P.C., should be pushed back.
However, the objection was dropped when Hugh voluntarily moved the auction date to January 14, which the court approved.
The court's approval means the company, AmeriBid, can move forward auctioning off the core of the college's 112-acre campus.
Stephen Karbelk is the co-chairman and founder of AmeriBid. He said the change in date will have an effect on the original marketing budget.
Originally, Karbelk said his company and the college agreed to a marketing budget of $64,000. At this point, AmeriBid has spent about $50,300 of that budget to advertise the auction.
Now that the date of the auction has changed, they estimate an additional $20,000 to $30,000 will be spent, putting them over budget.
For this auction to be successful, Karbelk said his company has "invested and put at risk our own money."
Karbelk stated that AmeriBid has paid for all of the advertising but does expect to be reimbursed by the college.
AmeriBid and Lon Morris have also decided that only qualified bidders may attend the auction.
In his decision issued from the bench on Dec. 5, 2012, Judge Parker denied attempts by the Texas Attorney General's Office to prevent the bankruptcy estate from securing the debtor-in-possession loan, which will be used to cover insurance, utilities and similar expenses, in addition to paying the professionals who are working to increase the estate's value.
"Today's ruling means the bankruptcy court agrees with our position that this loan and the upcoming auction are the best options available to pay the college's creditors by maximizing the value of the estate's assets," says Mr. Ray, a longtime veteran of Texas bankruptcy courts. "Our goal is to make sure the creditors are paid what they're owed, and everyone involved is working hard to make that happen."
The auction will include approximately 50,000 square feet of academic lecture halls, dormitory buildings, a technology center, a gymnasium, and fields for football, baseball and other sports. Tulsa, OK.-based AmeriBid is coordinating the auction based on prior approval by the bankruptcy court.
The judge scheduled a court date following the auction for February 4.
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