Wednesday, Aug. 27, 2003 | 11:14 a.m.
SUN STAFF AND WIRE REPORTS
Creditors for Las Vegas time-share group Mego Financial Corp. are asking a bankruptcy court to set aside a ruling that allows the company access to about $8 million in debtor-in-possession financing, documents show.
Citing a lack of proper notification for the Aug. 13 hearing in which the order was granted, and questioning the protection afforded some lenders under the deal, Mego Financial's committee of unsecured creditors is asking Judge Gregg Zive of the U.S. Bankruptcy Court in Reno to either amend or set aside his ruling dated Aug 14. Zive's decision allows the company to enter into a six-month, $8 million revolving credit line with Textron Financial Corp., Providence, R.I.
Court papers say that the committee -- appointed on Aug. 1 -- was unable to have legal representation at the Aug. 13 hearing because it was poorly informed by counsel for Mego Financial as to when the hearing was to take place. The court filing also attributed some of the miscommunication to scheduling problems resulting from the East Coast power blackout.
The committee also says the order is based on "unsupported finding and conclusions" regarding the amount and rank of liens held by Textron against Mego Financial, and that neither Trustee C. Allan Bentley nor Mego Financial "appear to have protected the rights of unsecured creditors," in advancing the financing pact in court. The committee wants Zive to set aside his ruling.
Mego Financial was given permission Aug. 14 to immediately borrow up to $5.2 million to fund its operations as it works toward its announced liquidation under Chapter 11 protection. It also has permission to borrow a further $2.8 million under the credit line.
Textron Financial, which lent around $45 million to Mego Financial before it filed for bankruptcy, will charge 14 percent annual interest on the loans and fees of $10,000 each month and 4 percent of the total when the deal is closed.
A hearing on the matter hasn't yet been set by the court. Neal Wolf, a San Francisco-based attorney representing the unsecured creditors committee, said today that a hearing on the matter hasn't been set by the court and he intends to file an emergency motion today to accelerate the hearing process. He explained that Zive is vacationing and that he is attempting to schedule a hearing through a visiting judge.
Mego Financial, also known as Leisure Industries, is a vacation resort development and marketing company based in Las Vegas.
Mego's Leisure Industries Las Vegas property is a 489-unit time-share resort just east of the Imperial Palace hotel-casino. Mego plans to sell the company's Las Vegas assets and eight properties in six other states to companies that would continue to operate them as time shares.
The company filed for bankruptcy protection July 9, listing $455,179 in assets against more than $39 million in debts.
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