Pioneer Mortgage officials and the bankrupt company's creditors recommended Thursday that remaining assets held by investors and the troubled company be pooled before being distributed to investors on a prorated basis.
The proposed plan of reorganization that was filed Thursday--a year to the day after the La Mesa-based mortgage banking company declared bankruptcy--drew an angry response from investors because it failed to describe how many cents on the dollar investors are likely to recover.
But attorneys who crafted the long-awaited plan told about 50 investors who jammed into U.S. Bankruptcy Court on Thursday that distribution estimates won't be available until Pioneer reconciles records left behind by former Pioneer owner and president Gary Naiman. That process will take about three more months.
Before entering Chapter 11 bankruptcy proceedings on Jan. 9, 1991, Pioneer arranged $200 million in real estate loans for 2,000 investors. About $150 million of those loans are no longer paying interest, and some investors fear that they will recoup less than 20 cents on the dollar.
Word that details about future disbursements won't be available for three months angered investors at Thursday's meeting. "We waited a year to hear something and (today) we've heard nothing," investor Ezra Kusnitt complained during the meeting.
When one investor demanded an "estimated range of recovery," Pioneer attorney Bill Wilson responded that "no one in this room can tell" what amount of money eventually will be returned. Creditors' attorney Ali Mojdehi said the plan would "get dollars flowing as soon as possible . . . that's our first, second and third priority."
After several investors criticized Mojdehi and Wilson, U.S. Trustee Sandra Wittman told investors that "your anger is being directed at the wrong people." Attorneys in the case have worked very hard to ensure that investors will get the best return possible, she said.
Creditors committee chairwoman Cynthia Stein described the document as the fastest way to get cash flowing to investors. Stein said the 90-day delay, although disturbing, was necessary because of the incomplete records left behind by Naiman.
In an unusual twist, the session was held without a judge in the chambers because U.S. Bankruptcy Court Judge James Meyers ruled that the meeting hadn't been properly advertised. Meyers will rule on the plan later in the year, if it first is approved by a majority of Pioneer's investors.
Although the plan recommends that all assets held by Pioneer and its investors be pooled and distributed for a prorated distribution, it also allows individual investors to initiate court proceedings if they choose to opt out of a pooled distribution.
According to terms of the proposed plan, six now-bankrupt Pioneer businesses would be incorporated into Pioneer Liquidating Corp., a newly created company that would go out of business after selling off real estate and real estate loans held by Pioneer companies and investors.
Pioneer Liquidating would be run by a seven-person board of directors that would include up to four Pioneer investors. Current Pioneer chief executive Dennis Schmucker, who has operated the troubled company since shortly after it entered bankruptcy proceedings, would leave once the board is in place.
Schmucker said Thursday the plan would begin to distribute "several million dollars" to investors as soon as it is confirmed. The company now is holding about $3 million in funds that belong to investors. Pioneer previously received Meyer's permission to distribute about $3 million in additional funds to a group of investors