Bank tries forcing LV firm into Chapter 7

Grace Leong

Monday, Dec. 31, 2001 | 11:30 a.m.

Wells Fargo Bank and another creditor of Las Vegas developer Saxton Inc., which say they are owed a total of $712,559, are trying to force Saxton into bankruptcy.

An involuntary Chapter 7 bankruptcy petition to liquidate Saxton's assets was filed against Saxton -- also known as Saratoga Land & Development Inc. and Jim Saxton Inc. -- on Dec. 20 by Wells Fargo and Las Vegas sweeping services company A Total Sweep Inc.

Wells Fargo wants to recover $708,299 in allegedly defaulted loans that Saxton said financed several developments including a 50,000-square-foot building at 5440 W. Sahara Ave. that houses Saxton's corporate headquarters and several commercial properties in Las Vegas, Utah and Arizona.

A Total Sweep said it's owed $4,260 in unpaid street sweeping and parking lot sweeping services provided for three buildings within Saxton's headquarters complex.

Ron Worley, Saxton's vice president of compliance, said the company is still operating normally. It has about 40 employees.

Worley said the involuntary petition was filed to block attempts by other Saxton creditors, including Kansas City, Mo.-based Midland Loan Services, from foreclosing on Saxton's headquarters.

Worley, who said he couldn't specify the amount of the Midland loan as well as that of Saxton's total debt, said Wells Fargo had received "substantial payment" when two Saxton properties in Arizona and Utah were sold.

Wells Fargo declined to comment on its reasons for the involuntary petition. A hearing on the petition hasn't been scheduled yet.

Dan Waite, an attorney for VOA National Housing Corp., one of Saxton's creditors, said: "Word on the street is that Saxton is now a tenant at its corporate office building and is now in danger of being evicted. Wells Fargo filed the involuntary petition probably because it felt that if Saxton got evicted, its chances of being paid back will be reduced."

Worley declined comment on Saxton's alleged status as a tenant in its own building.

Also potentially hurting Saxton's position was a Dec. 10 Nevada Supreme Court decision upholding a judgment of $1.325 million plus interest against Saxton in favor of VOA National Housing.

That judgment was entered in July 2000 in Clark County District Court, said Waite.

"When a judgment is recorded, it constitutes a lien against all of the entity's real property, meaning if the entity tries to sell its property, the lien will show up," Waite said. "Since the lien follows the property, it could potentially inhibit property sales since anyone who's smart won't buy the property unless the lien goes away."

VOA, a Washington D.C.-based management agent of two Saxton properties in Las Vegas, Lake Tonopah apartments and Saratoga II apartments, sued Saxton in 1998, alleging it wrongfully terminated VOA's management of the two apartment properties it said they jointly owned.

A settlement was reached in January, but VOA later sued Saxton, alleging it didn't comply with the terms of the deal. That suit resulted in the $1.325 million judgment that was upheld by the Supreme Court.

Worley said Saxton hasn't decided on what to do about the involuntary petition, but is "considering alternatives including opposing the petition and filing a countersuit."

"We will fight the petition and may move to try to convert the Chapter 7 to a Chapter 11 to continue our operations," he said.

Saxton's financial difficulties -- and its battle to stay out of bankruptcy -- date back to late 1999, when the company said in reports with the Securities and Exchange Commission that it had to slow down its construction because of "cash flow problems and over-expansion." Over a five-year period, the company had been active in commercial development and affordable home building in Las Vegas, Phoenix, Salt Lake City and Reno.

Saxton blamed the cash flow crunch on a variety of factors, including a 1998 acquisition of an Arizona home builder, land purchases in Utah, inability to find refinancing, and the company's "failure to adequately monitor and manage its cash flow." The company began liquidating assets to bring down its debt load and improve cash flow.

The company was able to resume development of projects in Utah and Nevada by September 2000, but was sued repeatedly by contractors for unpaid bills, as well as shareholders, who saw their investments in Saxton wiped out.

Over the nine months ending Sept. 30, 2000 -- the last financial report filed by the company with the SEC -- Saxton posted a loss before one-time gains of $15.66 million on revenues of $77.3 million. In the comparable period in 1999, the company earned $2.5 million on revenues of $102.6 million.

By June 2000, the company's struggles had taken a severe toll on its stock, and Saxton was delisted from the Nasdaq exchange. Nasdaq officials cited a failure to meet listing requirements, as well as failure to file financial reports with the SEC. Stock worth $8.25 per share at Saxton's initial public offering in June 1997 reached 1 cent per share by June 2000.

Saxton traded over-the-counter until February 2001, when it filed a deregistration statement with the SEC.

The Sun's David Strow contributed to this story.

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