Federal judge gives Naples Bay Resort partners a chance to reorganize company

— The company that developed the Naples Bay Resort will live on.

U.S. District Judge Jeffery Hopkins decided Tuesday to convert the company's bankruptcy case from a Chapter 7 liquidation to a Chapter 11, paving the way for it to reorganize and continue operating.

The judge's ruling came after a hearing that lasted more than five hours at the federal courthouse in Fort Myers.

Last year, Naples developer Jack Antaramian and several other creditors filed an involuntary petition for Chapter 7 bankruptcy against the development company, Basil Street Partners, which he was a partner in until he resigned. He said it was the only way to get new financing to keep the resort open.

Antaramian has been battling for control over the 20-acre Naples Bay Resort project, near Tin City in downtown Naples, which includes a 21-room luxury hotel, 30 condominiums and a marina.

The bankruptcy case has pitted him against his three other partners in the project: Fred Pezeshkan, president and CEO of Manhattan Construction (Florida), a general contractor in Naples, and foreign investors Iraj Zand and Raymond Sehayek. The three partners fought to convert the case to a Chapter 11 reorganization. Antaramian's attorneys argued it was inappropriate and unnecessary, but the judge disagreed, saying it made sense to continue operating the business. He said no harm would come from it.

Antaramian's attorneys did succeed in getting the judge to approve a court-appointed trustee to oversee Basil Street's reorganization. The other side argued there was no need for a trustee and the three partners wanted the exclusive right to craft a reorganization plan.

Jack Antaramian on NewsMakers

Jack Antaramian on NewsMakers

Antaramian was happy with the judge's decision to appoint a trustee, who he believes will work in the best interest of all of the creditors in deciding what ultimately happens with the project.

"That's exactly what I wanted as a creditor," he said. "I thought it was very important that a trustee be put into place."

Alan Perlman, the attorney representing Antaramian's three partners, fought to have a separate hearing on whether to appoint the trustee, saying he wasn't given enough notice that it would be pushed for at the hearing. He also complained about a slew of last-minute exhibits filed by Antaramian's legal team.

Hopkins described the case as highly contentious, with much to gain or lose on both sides. Ultimately, he said, the case is about control over the project.

Basil Street presented what Daniel DeMarco, an attorney representing Antaramian, described as a "bare bones" reorganization plan that it hoped to advance without a trustee.

The proposed reorganization plan called for a new capital infusion of $5 million, but DeMarco criticized the fact that the company agreeing to make the new investment was closely tied to Pezeshkan, Sehayek and Zand and their families, which he argued created a conflict of interest.

Jerry McHale, a court-appointed receiver for the Naples Bay Resort project, testified there was a need for an independent trustee in the case because the warring factions were making it difficult for him to do his job. He has been operating the project since October 2010 and both sides agreed he should continue to do so, even after the appointment of the trustee. That means that operationally nothing will change.

In April, Hopkins approved more than $3 million in new financing to keep Naples Bay Resort running through the end of the year as the legal battles between Antaramian and his partners continue.

The trustee for the Chapter 11 case could come up with a reorganization plan for Basil Street or solicit other plans.

Antaramian said he's not sure how the company can reorganize when the resort project continues to lose money.

"If you have to keep borrowing money to run the facility, how can you reorganize?" he asked. "You have to borrow more money and you need more loans. It just doesn't make sense."

__ Connect with Laura Layden at www.naplesnews.com/staff/laura_layden

© 2012 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Comments » 1

mkc writes:

Does not make much sense! Borrow more Money, when you continue to Lose money every day!

Sounds like a death spiral...

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