Special Report by InsideTheGate.com
August 6, 2010 — On Friday, March 5, 2010, Celebrity Resorts, LLC and 35 affiliates voluntarily filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court in Orlando, Florida. The companies have continued operations while the reorganization process is sorted out.
The following is a partial update on the status of that case, which is turning out to be quite fractious as it relates to family affairs.
JUNE FINANCIAL REPORT: On July 29, 2010 a monthly operating report was filed for the month of June, 2010. According to that report, Celebrity Resorts had slightly more than $1 million in receipts during June, with $177,000 coming from cash sales and $401,000 in rental income. The company’s disbursements in June totaled $1.17 million. The largest categories of disbursements were for payroll ($841,000) and insurance ($99,000). Over the course of the bankruptcy cases, Celebrity Resorts has had receipts of almost $6 million and disbursements of slightly less than $5 million. The company ended June with $2.16 million in funds.
MOTIONS: There has been a flurry of motions filed within the last month by various interested parties, but primarily by Neil Meyers and Jared Meyers/Celebrity Resorts, most of those having been withdrawn. Included among those motions:
- a Motion to Dismiss Case or in the Alternative, Convert Case to Chapter 7, filed by Farmington Bank (a scheduling conference on this motion was held on July 21);
- a Motion to Determine if Chapter 11 Bankruptcies were filed without Authority, filed by Neil Meyers (withdrawn);
- Celebrity Resorts’ Motion to Strike Neil Meyers’ Motion to Determine if Chapter 11 Bankruptcies were filed without Authority (withdrawn);
- Celebrity Resorts’ Motion for Court to Reserve Jurisdiction to Levy Sanctions and Shorten Safe Harbor Notice Period (withdrawn);
- Celebrity Resorts’ Motion for an Extension of its Exclusive Periods to File a Plan of Reorganization and Seek Acceptances (The court granted the request for an extension of the exclusive periods, overruling an objection filed by Textron Financial Corporation. Exclusivity was extended to August 6, 2010.)
There was also a motion filed by Celebrity Resorts of Kauai, LLC (one of the debtor companies) seeking to assume an unexpired lease of non-residential real property between itself and the Association of Apartment Owners (Apartment 16-b at the Hanalei Bay Resort). On August 2 the AOAO formally objected, saying that the debtor cannot independently assume that lease because it is part and parcel of the entire settlement agreement.
The settlement agreement between the AOAO and the Developer Incorporated the lease as a “Sales Center” for timeshare resort marketing for a period of three years, with lease payments and various fees to be paid monthly. The AOAO points out that to allow the assumption of the lease, without assumption of the entire settlement agreement, would be to break up an unseverable single contract and would result in a windfall to the debtor compromising the carefully negotiated give-and-take of the agreement.
The AOAO also pointed out that to date the debtor still owes the AOAO $18,132.92 in unpaid rent in addition to other fees, that in fact the debtor has failed to ever pay any of the rent since the inception of the lease. In addition, the AOAO holds that the debtor is in default in other areas as well, including: The failure of the debtor to erect a dividing wall and build out the sales office as required; the failure of the debtor to enter into an agreement with Trading Places International to provide concierge services for guests, thus depriving guests of concierge services as well as depriving the AOAO of fees derived from the sale of such services.
The court will be making a decision about those two motions in the near future.
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