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Dracut developer looks to rebuild after Chapter 11
(Sun, The (Lowell, MA) Via Acquire Media NewsEdge) Jan. 4--DRACUT -- Frank Gorman is breathing easier and sleeping better after having crawled out from under the Chapter 11 bankruptcy claim he filed 16 months ago after the reconstruction of the Beaver Brook Village on Lakeview Avenue.
Gorman says a reorganization plan was approved by U.S. Bankruptcy Judge Joel Rosenthal on Dec. 24 and accepted by almost all of his 200 or so creditors.
"The last hearing was at 10 a.m. on Christmas Eve. The judge said he would take it under advisement," Gorman said. "Before he went to bed that night, he e-mailed everyone involved, informing them of his decision. The plan was approved. It was the best Christmas gift I could have asked for."
The plan calls for Gorman to distribute $130,000 to
his creditors in the next week. Another $400,000 will be paid in the next three months and the balance is expected to be paid within the next six to 10 years.
"It's not cents on the dollar like a lot of people are saying," said Gorman. "That would have been the case under Chapter 7 bankruptcy and that would have put me out of business."
Under Chapter 11, debtors have the right to propose a reorganization plan that must satisfy a number of criteria to be approved by a bankruptcy court. Creditors must also sign off on the plan. Gorman said the plan was approved by 94 percent of his creditors. The other 6 percent represented two creditors, Gorman said, adding that a no vote doesn't negate his obligation to pay them.
"They
may have voted no because they didn't understand the concept or maybe they were sending a message that they weren't happy," Gorman said. "Hey, I wasn't happy either. I didn't enjoy this. It was tough. I see all those people in coffee shops, in the supermarket, at the gas station. They know what kind of car I drive."
Rosenthal appointed a representative from the host of creditors, who attended the meetings and reported back to the rest. That representative, who did not want his name publicized, said that while the majority of creditors voted to accept the plan, nobody is happy about it.
"It's a tough situation. A lot of people lost a lot of money," said the representative. "We're looking at a minimal payout out front, which comes up to about 2 percent. Some of us are going to get tiny checks and others will get larger checks, depending on what he owed us. Everybody is going to get something, but it won't be much."
Would he work for Gorman again?
"It depends on the project and where the money is coming from," he said. "If we have a contract with a bank, if there's a way to protect ourselves, yeah, I'd work for Frank. I'm in business to make money. My company took a big hit, but I'm better off than most. There are some guys who lost everything. Frank left a lot of people very angry."
When Gorman filed for Chapter 11 bankruptcy on Aug. 10, 2007, he owed his top 20 creditors, including Lowell attorney Louis Saab, more than $2.8 million. Attempts to reach Saab were unsuccessful.
To satisfy his debts, Gorman needed to come up with a plan that would bring him out of a $4 million hole. He infused new money into the reorganization plan and generated $1.8 million from the sale of as many as two dozen properties. He also sold the cell-phone antennae on the roof of the mills to Verizon, which had a 20-year lease, for $605,000. He waived a $1.6 million debt from Beaver Brook Village to Gorman Management Trust, another entity he owns. Two pending insurance claims could bring in another $800,000. One of those claims stems from an the Mother's Day flood of 2006, which caused an estimated $800,000 in damages to the mills.
The 2007 filing is the second time Gorman has sought Chapter 11 protection. The first time was in 1990 when Gorman Management Trust had $4.5 million in unsecured debt. The trust filed for Chapter 11 bankruptcy just 30 days after the Beaver Brook filing in 2007. In July 2008, the court agreed to join the two filings as one. At the time, Beaver Brook Village and $12 million in assets and $14 million in debt. The trust had $8.6 million in assets and $10 million in debt.
The Beaver Brook Village project began in 2002. The five-story former textile mill was converted into 47 affordable- and market-rate apartments, all of which are occupied. The one-story section of the building on Mill Street houses new and old commercial and retail businesses. The Verizon antennae are hidden in a flagpole on the roof.
"It's ironic when I look up at the flagpole on top of the building," Gorman said. "It represents the American dream. This project was my dream. It was my baby. I've lost everything, but I get to keep the mills."
To see more of The Sun, or to subscribe to the newspaper, go to http://www.lowellsun.com.
Copyright (c) 2009, The Sun, Lowell, Mass.
Distributed by McClatchy-Tribune Information Services.
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