George L. Miller, Trustee

Eight Penn Center, Suite 950

1628 John F. Kennedy Boulevard

Philadelphia, PA  19103

 

Phone:  (215) 561-0950

Fax:  (215) 561-0330

Email:  [email protected]

 

 

September 1, 2005

 

 

STATUS UPDATE #1

 

 

Proofs of Claims

 

The bar date for Proofs of Claims expires on September 16, 2005.  All claims must be mailed to:

 

Clerk of the Bankruptcy Court

District of Delaware

824 Market Street

3rd Floor

Wilmington, DE 19801

 

I do not have claim forms but they can be obtained from the following website www.deb.uscourts.gov. Please attach to the Proof of Claim copies of as much information as possible.

 

 

Liquidation Process

                                               

The ABFS offices were closed on September 1, 2005 and the Trustee ceased operations.  The assets available at the time of conversion to Chapter 7 are estimated as follows:

 

            Whole Loans                          $29,600,000

            Other Mortgage Assets            14,900,000

            Furniture and Equipment              200,000

            Other Assets                                  700,000

                                                           $45,400,000

 

                                                           

In addition to the assets listed above, there are 19 mortgage residuals (IO Strips).  I have engaged Boston Portfolio to value these IO Strips.  Boston Portfolio has not completed their valuation. However, cash flow from the IO Strips could range from as little as $40,000,000 to as much as $180,000,000.  The results of the valuation and liquidation of these IO Strips will have a significant bearing on the amount and priority of payments to creditors.

 

Greenwich Capital is the secured lender with the prime secured position.  As of the date of conversion to Chapter 7, Greenwich Capital’s outstanding secured debt was approximately $75,000,000.

 

There is Subordinated Debt of collateralized note holders of approximately $94,000,000. As of this writing, I have not concluded as to their secured/ priority status.  If I determine that the collateralized note holders are secured, their indebtedness would be in a position subordinate to Greenwich Capital.

 

There is in excess of $550,000,000 in unsecured creditors and note holders.

 

On August 19, 2005, the Whole Loans were sold for $29,600,000, of which $29,300,000 was paid to Greenwich Capital. I have liquidated approximately $13,000,000 of the other Mortgage Assets of which approximately $10,000,000 has been paid to Greenwich Capital and $3,000,000 was spent in operations. Greenwich Capital had an outstanding balance of approximately $39,000,000 as of August 31, 2005.  The amounts paid to Greenwich Capital included principal interest and costs. 

 

The un-liquidated assets as of August 31, 2005 are:

 

            Other Mortgage Assets                     $1,900,000

            Furniture and Equipment                       200,000

            Other Assets                                           700,000

                                                                      $2,800,000

 

Because the above assets are fully encumbered by the lien of Greenwich Capital, there may be little benefit to the note holders or unsecured creditors from the liquidation of these assets.  At present, it has not been determined whether Greenwich Capital or the Bankruptcy Trustee will liquidate these assets.

 

The IO Strips will be liquidated over a period of years in order to maximize the proceeds.  The process of this liquidation is currently under negotiation between Greenwich Capital, Subordinated Debt Indenture Trustees, and the Bankruptcy Trustee.

 

I will advise in my next status letter of the process selected to liquidate the IO Strips.

 

 

Investigation

 

My investigation of the financial transactions of the Debtors continues.  I have requested the law firm of Obermayer Redman Maxwell & Hippel to assist me in my investigation of the conduct and acts of the directors and management of the Debtors.  The Debtors have Director & Officers Insurance and Errors & Omission Insurance.

 

I have also identified numerous preferential transfers pursuant to Section 547 of the Bankruptcy Code.  I have requested the firm of A.S.K. Financial to assist me in the recovery of preferential transfers.

 

My investigations may disclose certain types of transactions for which I could use the assistance of the note holders or creditors. Requests for information and documentation will be made through this web site.