The unsecured creditors' committee of SunCrest LLC, the owner of a master planned community in Draper, reached a settlement with the secured lender Zions First National Bank and will halt their efforts at overturning approval given in June for the bank to acquire the project.
In papers filed this week, SunCrest describes how $354,000 will be made available to unsecured creditors, while waivers of claims by the bank and a non-bankrupt affiliate of SunCrest will produce other funds for paying claims. The SunCrest affiliate has been funding the reorganization.
The creditors' committee was authorized to sue the bank.
The settlement calls for the Salt Lake City-based bank to waive all claims except an unsecured claim for $7.5 million. The claims of lawyers for their fees during the reorganization will be capped.
The settlement will come to bankruptcy court for an approval hearing on Sept. 29.
The committee had been protesting the sale as providing "no benefit to any creditor other than Zions." The committee argued there wasn't enough money left to pay the outstanding expenses of the Chapter 11 effort. The committee also was asking the bankruptcy court to convert the case to a liquidation in Chapter 7.
The sale, valued at more than $44 million, called for Zions to exchange $25 million of its secured debt; pay $250,000 cash; and assume the cost of curing contract defaults that may total $19 million.
SunCrest listed assets for $46.4 million against debt of $96.6 million. The property has 2,452 unsold lots.