PHOENIX (BP)–The Baptist Foundation of Arizona will liquidate its assets in an effort to repay nearly $600 million owed to investors.
The decision was announced following recent meetings with more than 4,000 investors, according to foundation spokesman Lew Phelps, of the Los Angeles public relations firm of Sitrick and Co.
Phelps said the polled investors overwhelmingly rejected the foundation’s restructuring plan proposed as part of its Chapter 11 bankruptcy filing in early November. In Chapter 11 bankruptcies a company is protected from creditor suits while it develops a plan of financial reorganization acceptable to the court and its creditors. According to court documents, the foundation listed liabilities of $640 million. About $590 million is claimed by 13,000 investors while estimates of the BFA’s assets range from $160 million to $200 million.
Under the original plan, investors would have been given two options: “cash out” where investors would receive 20 percent of their original investment, or invest in a new publicly-held company that would be formed to hold and manage the foundation’s assets.
“The restructuring committee determined most investors did not want the proposed 20 percent distribution plan coupled with a new company, a publicly-traded BFA,” Phelps said.
Instead, the spokesman said the restructuring committee will propose a new company, with liquidation shares instead of stock. The sole purpose of the new company will be to sell off the company’s assets and distribute the proceeds to investors.
The BFA’s proposal is pending approval from a committee representing investors and the foundation’s restructuring committee before it goes to Bankruptcy Court.
Phelps said he anticipates an orderly liquidation of the foundation’s assets, which include real estate, subdivisions, and golf courses. The entire process could take several years to complete.
“It’s not going to be a fire sale,” he said. A quick disposal of properties could bring in prices far below the estimated values, Phelps added. Contrary to belief that much of the foundation’s real estate portfolio is junk, officials say the foundation owns some excellent properties likely to attract competitive bids.
And while, Phelps said, all investors will be treated equally, some don’t hold out hope for recovering their money.
“I’m not going to be getting very much of my money,” Edna Hinkle told a Phoenix newspaper. “If I could get our original investment of $20,000 back, I would be happy.”
Hinkle, 73, of west Phoenix, and her husband had entrusted the foundation with $63,000, according to the article in the Dec. 16 edition of the Arizona Republic.
The Hinkles are members of Glendale’s First Southern Baptist Church. Members of the church reportedly invested $1.5 million in foundation holdings. The investment was to be used to help pay for a new building.
Joan Kraska, on the other hand, told the Arizona Republic, she was pleased with the proposed plan. “I couldn’t be happier. I’m thrilled,” she said. “To me, it’s like Christmas. I think it’s our only hope.”
The BFA’s troubles began in August when it was accused of securities fraud and was ordered by the state to cease and desist selling securities. The Arizona Corporation Commission likened the BFA’s practices to a “complex Ponzi” scheme. Three of the top BFA officers were later fired, two offices in Arizona were closed and 72 employees were laid off.
The BFA, an agency of the Arizona Southern Baptist Convention for 50 years, had been known in Southern Baptist financial circles as very aggressive in its approach to potential investors.