Kara Unsecured Creditor's Blog
Someone started a blog that compiles information related to the Kara Homes' bankruptcy. Here is the address www.karahomescreditors.blogspot.com.
posted by Little_Silvered at 7:13 PM
Sunday, November 12, 2006
Previous Posts
- The NAR's New Ad Campaign
- Providing the American Dream
- 4514 Houses on MLS this Week
- More Open House Observations
- Kara Home, Fallen Star etc.
- Post New Jersey Housing Market Observations Here
- Almost Out of Zuhdi's Hands
- Interview with Grim from North Jersey
- Dwek Properties Will be on the Web
- 4558 Homes on the MLS
107 Comments:
Well friends, tomorrow is a big day in the life of Zudi, where the Bankruptcy Court has scheduled an omnibus hearing at 1:00 pm before Judge Kaplan. As I understand it, the key decision relates to two competing motions. On one side you have Zudi and the Official Unsecured Creditors Committee seeking the appointment of Traxi LLC “as crisis managers and to provide a chief restructuring officer, Perry Mandarino, to manage the day-to-day operations, under the supervision of an independent, three member Board of Directors.” On the other side you have the U.S. Trustee, with the support of North Fork Bank (and probably some other secured and unsecured creditors), requesting the appointment of a bankruptcy trustee (probably under Chapter 7) to liquidate the case rather than follow the path of a protracted and expensive reorganization. I’ll outline below what I think are possible ways Judge Kaplan may rule.
Before we get to Judge Kaplan, I’m going to focus my thoughts on how I expect things to go for Zudi. Frankly he is, in my humble opinion, in a loose-loose position. Which ever way it goes tomorrow, it isn’t going to be good for Zudi. I suspect he will find himself unemployed, with no where to show up for work on Tuesday. If he were smart I suspect he spent at least part of this weekend renting a U-Haul truck and emptying his office of personal effects.
Now Judge Kaplan faces a rather interesting decision that may be based upon what is currently an unknown. That is whether or not a valid commitment for debtor-in-possession (DIP) financing is going to be in place by the time he makes his decision? As some of you may recall, Mr. Bruck, the Debtor’s attorney had promised to file another application for financing on November 7th in conjunction with his pending application for the appointment of Traxi (see http://tinyurl.com/ycrmzw ). As far as I’ve been able to ascertain no such new motion has been filed.
Now it is entirely possible that Traxi has a relationship out there with some lender willing to provide financing. After all, this case will likely be a wonderful income producer for Traxi if it gets the appointment. Problem is, entities providing DIP financing will not go forward unless their loan can be adequately secured. I’m guessing given the size of Kara’s borrowings that its lenders cross-collateralized the borrowings, recording secured real estate liens (mortgages) and personal property financing statements (UCC-1 forms). I’m also guessing the hunt for unencumbered Kara/Zudi assets is going to be difficult at best.
If DIP financing is not available, I seriously doubt Traxi will remain “onboard” and accept the so-called crisis manager assignment. Nothing worse than doing work and not getting paid on it. Just ask Kara’s sub-contractors. As you can tell from what I’ve said, I firmly believe that if DIP financing isn’t going to happen then Judge Kaplan has little choice but to rule in favor of the U.S. Trustee, converting the case to one under Chapter 7 and order the appointment of a trustee.
If DIP financing is in place, I’m betting the good Judge will approve the appointment of Traxi and the case will move forward at glacial speed in a fashion designed to meet the specific goal of producing income for the reorganization effort professionals while actually lowering the ultimate dividend paid to unsecured creditors than if it had proceeded in Chapter 7 liquidation.
As I indicated above, either way doesn’t help Zudi (Mr. Loose-Loose). In my humble opinion, with conversion to Chapter 7, the winners will be unsecured creditors. With a continued reorganization effort under Traxi’s leadership, the winners will be the bankruptcy professionals (attorneys, accountants, financial advisors, crisis manager, etc.).
Take care all.
SCProfessor
Then on to chapter 7 for the benefit of the unsecured creditors! "Can't-Wait" to find out what happens next.
Does zudi have a plan or will kara go under
let's see
So the court decided to play along with these vultures and allow Kara to bum more money to feed the hungry executive staff that blew 300 million bucks and ruined people all over the state. What a joke. Watch as the first act of this crisis management team will be to fire everyone not intimately connected to Zudi in some way, as usual.
See http://www.app.com/apps/pbcs.dll/article?AID=200661113019 below
I guess I did a fairly good job of analyzing the situation. Traxi I suspect is the source of the Bear Sterns $2.6M financing. Heck, when you look at the fact that Delta's bankruptcy professionals are seeking over $100M in fees, you begin to understand that workout specialist assignments can be financially rewarding.......
SCProfessor
____________(Article)__________
Crisis management team to run Kara Homes
Posted by the Asbury Park Press on 11/13/06
BY MICHAEL L. DIAMOND
AND DAVID P. WILLIS
BUSINESS WRITERS
TRENTON — A crisis management firm will take over the daily operations of Kara Homes, a bankruptcy court judge ruled today.
U.S. Bankruptcy Court Judge Michael B. Kaplan's decision to allow Traxi LLC to take the reins of the company came as Kara's attorney said investment bank Bear Stearns is ready to provide $2.6 million in short-term financing to the troubled home builder.
In making the decision, Kaplan denied a motion by the U.S. Trustees' Office to remove founder and owner Zuhdi Karagjozi and appoint a trustee to run the company.
Kaplan did not rule on a request by North Fork Bank to liquidate the firm.
East Brunswick-based Kara Homes, one of the largest builders in Monmouth and Ocean counties, filed for Chapter 11 bankruptcy protection on Oct. 5. It owes creditors, including banks, suppliers, employees and customers, $227 million.
2.6 million is squat, after everyone gets their fee there will be little if anything left to "build out" with. This is all about that man desperately holding onto any scrap of power he can. By the end of the day, Kara Homes will consist of nothing but some lawyers and a few of the same morons who mooched the business dry, wait & see. Everyone loses except the attorneys.
What can they get done with $2.6 mil ? Please explain if you have can
$2.6M, they couldn't build with $300M...this is such a joke
2.6M is enough for Zudi, Hektor, & Robbie to leave the country.....hopefully
Anon 2:37 asked, "What can they get done with $2.6 mil?"
Use of funds is limited I'm sure to post-filing Chapter 11 administrative expenses. Here we are talking about salaries and usual business expenses and includes taxes. Notice the way this has been structured. Traxi was hired, not Mr. Mandarino. This I suspect will enable Traxi to pay the salaries of Mandarino et al as ordinary and usual operating expenses. Their stated billable rate, as I recall from an earlier posting, runs as high as over $500 per hour. (-Sarcasm on) At that burn rate, how long do you think it will take to go through $2.6M? (-Sarcasm off)
approximately 5,200 hours (not including OT)
approximately 5,200 hours (not including OT)
approximately 5,200 hours (not including OT)
Thanks SCProf - I guess you're saying not a whole hell of alot
I guess what I'm saying is all that this solution provides is a new level of management that is probably a little more effective but certainly substantially more costly.
If you have not guessed, I'm a believer that little will be gained in allowing this Debtor to continue to operate. Call me a cynic, but I've just seen too many situations like this where all that happens is a redistribution of wealth.
yeah redistribute the money to Zudi and his inner circle
yeah redistribute the money to Zudi and his inner circle
Will Zudi have any say where that money goes - or is he out of the decision making process ??
who is going to want to live in those homes that have been half built and sitting and rotting in the elements - doesn't the Judge take this into consideration when looking at these matters - the money needed to complete these homes now compared to six months ago must have gone up significantly
Expect Zudi to be pushed aside. It probably won't happen as fast as most of you would like but it will happen. For the short-term, Traxi will benefit with his cooperation. But down the road they will reach an impasse as to a challenging issue and Zudi will be forcefully invited to work at home.
Hey now, don't lash out at SC, this is almost exactly what he predicted. If you actually read his posts you'd know what he feels will eventually happen down the line. Which is not good for everyone's public enemy number one.
So a cut of this funding will obviously go towards paying the management firm and attorneys. The rest will go towards running the company. So logically, the next step will probably be another round of job cuts in order to bring payroll down to the bare minimum. With someone else having a say now, I wouldn't be surprised to finally see some prominent names get the axe. A more impartial eye is going to be command who, ideally, will have the company's interests in mind, not the owner's like before.
After that, who knows? I do find it very unfortunate when lawyers and such end up profiting from misfortune but that is what they do. SC was also correct when he stated that the court tends to frown upon doom and gloom scenarios, they're more likely to give someone else a chance if the opportunity exists, even if that chance exists mainly on "paper".
My guess-this will drag on and on through the winter. Not much will actually be accomplished during this time, as far as building goes. There will be a feeble attempt at survival, maybe even some positive press. But by the time spring rolls around it will be obvious that it's a dead issue & the final liquidation will commence. None of it is merry & none of it makes anyone very happy but no one ever said bankruptcy was fun or fair. There is also the question of various "improprieties" which have previously been pointed out, and of course if anything criminal occurred, well, that could change things I suppose!
Did they indicated whether or not any of that 2.6 million would be allocated to completion of the bocci ball court?
The bocci court will be ready as soon as the retention pond freezes over.
pool house first then bocci court
Disgruntled Goat, aside from one earlier poster, I have not sensed anyone picking on me. Now it is entirely possible a few participants may not like my message, but I don't see any interest in killing the messenger.
Your analysis of what winter brings is I suspect accurate. Now here at the Left Coast, construction continues because we lack the winter forces that close down your outside activities (with the exception of ice fishing).
Take care and move on. That is my sound advice. For me, I'm on sabbatical this year and one of my activities is creating a new class that focuses on fraud examination. So, in the interests of education, I'll keep an ear to the case.
SCProfessor.
SCProfessor - please continue to post. From day 1 your writings have been most entertaining. Curious, do you know Zudi personally? If not, you are right on with most of your "humble opinions". Thanks for the informative postings. Former KH employee
Never heard of him or KARA Homes until I read about the situation after doing a Google News search with the keywords "bankruptcy" and "developer." As I've said a number of times, Zudi isn't unique and has many of the same characteristics of a typical real estate developer. Ego and self-centeredness come to mind....
Is it worth attending the creditors meeting this Thursday or is it a waste of time?
well then, I guess you can see what an "interesting" place it was to work....someone should write a book or a screenplay :-)
I hope someone can answer a question regarding the escrow deposits I paid for the Landings at Manahawkin. The first payments were made out to Charles Applebaum, Esq. totaling appx $35k and this is the amount listed in the Landings bankruptcy filing. However, for the last payment of $15k I was instructed to make it out to Robert McGowan, Esq. Since this amount is not included in the filing, does that mean it is still in escrow with the attorney? Also, the Landings public offering booklet and the sales contract indicate that there is an "escrow deposit bond" of $4 million. Does anyone know if that bond was established and is still valid? I can't get any answers from anyone.
Thanks SC, it has been great to read an outsider perspective especially from someone so familiar with corporate bankruptcies. Kudos for your accurate opinions too. No one ever told me that the REAL money is in representing others who lost lots of money that didn't technically belong to them. Wonder if unemployment will pay for law school?
My biggest regret is that I didn't bail even though the signs were clearly there. The main attorney, HR guy & construction chief left within a few months of each other. Instead, I stayed and trudged through that awful death march of a summer along with my other doomed coworkers. Too late to bitch about it now, though, besides I would have missed out on all this fun. Plus, when my next employer goes bankrupt, I'll know exactly what to do.
All right, here we go. My prediction is that between 15 to 20 people will be let go on Tues. and the people that remain will have to take a pay cut.
Also, if anyone thinks you are getting those 3 weeks of salary you are mistaken. I bet Bear Sterns is not going to let Kara pay any prepetion wages with the 2 million. (maybe if they make any money off of closings)
Tues is going to be a bloodbath!!! I wish everyone good luck.
This Traxi company is not going to feel bad for anyone
Let me try to provide some answers to Anon 6:33 and his request for help on the two deposits. If you were here on the Left Coast, I could answer with ease because of existing state consumer protection laws. New Jersey doesn't have that sort of consumer protection legislation in place apparently. But I don't think that leaves you out in the cold if the facts are as you indicate. That is, you would not have authorized the turning over of the funds you made payable to the two attorneys if the "escrow deposit bond" was non-existent. If I were in your shoes, the first thing I would do is make demand upon both of these attorneys for return of the funds you made payable to them, indicating in your demand letter that your payment to them was conditioned upon there being an "escrow deposit bond" and if it is non-existent then they have effectively been involved in an action to mislead you.
There are other avenues to approach, but I'd rather not talk about them on this blog. If you want you can email me at smiller1961ca@yahoo.com.
To Anon 6:21 -- The 341 meetings can be entertaining if you have some tough questions you want to ask that if answered accurately will reflect dishonest behavior by Zudi. This is particularly true if that activity involves hiding assets. You know, the sort of leading question like isn't Joe Smith, the person you sold your 5,000 square foot vacation home on the Jersey Shore for $100,000 (with a true value of $750K), your brother-in-law?
To Disgruntled Goat -- Hell you might as well do something destructive,... I mean productive, while on unemployment. Law school was fun in a weird sort of way. Just don't go into law thinking you are going to be part of the solution or you'll disappointingly leave recognizing you are part of the problem.
Hey disgruntled goat - when Zudi's smartest and hardest working family member left and some others were let go - that's when you should have known it was time to go (May & June)- along with the hiring and firing of a new General Counsel within a week - you got it right though, too late to bitch, time to just sit and watch
and SCProf - keep up the informative posts
What family member? Cousin Eni?Eva? Uncle Hector, Kevin and the rest? One of these was the smartest and hardest working? Don't make me laugh!
He is talking about the Golden Boys they were from the other side of Zudhi's family I guess that is why they actually had a brain!
I wonder if Zman is going to try to bamboozle Traxi. I would love to be a fly on the wall at these new and improved Wednesday night meetings. With someone else in control, they will get an opportunity to see how poor Z's knowledge of the home building business really is and wonder how they managed this long. Or better, to hear Z have a melt down in front of the new management and go off on how he is going to get big once again and how important he still is to NJ's home building industry. He will never change. Bet on it. Also bet how long he will hold his seat.
Why is it when I hear "Uncle Hector", I see a vision of the Adams Family "Uncle Fester."
Do they look about the same? -- See http://tinyurl.com/wt9jn
Whenever I picture Uncle Hek, I visualize a big question mark with feet.
Re: smartest family member, definitely not Eva.
Does anyone know what happened yesterday is it chapter 7
After reading the various articles about yesterday's hearing, I get the impression that the court will not be infinitely patient in this case. There will have to be some concrete evidence of actual progress, and soon. I just do not see it happening. Kara's sites have been sitting there dormant since long before October. All sorts of issues must be addressed before any actual building takes place. This is going to require significant amounts of cash, which makes me question how they'll generate any kind of profit from them in the long run.
Even if they do manage to build out, who is going to buy these homes? Sales traffic was at a crawl all year long, I find it hard to believe that buyers will suddenly snap up any and all completed units if it ever went that far. They have spec homes that have been sitting there all year with no takers. What's he going to do, slash prices and drag the entire NJ RE business down with him? He'll have Diane Turton and the like chasing him around with pitchforks.
I stand by my guess, they'll go through the motions for a while, maybe even manage to get something done on a small scale. By early 07, it will be obvious that the situation is hopeless and the court will have no choice but to pull the plug.
To the poster above, there is an article in today's Home News that details yesterday's events.
As we speak I'm sure the construction lenders are busy obtaining appraisals that will probably easily establish that the market value of their security, when all construction is complete and the property ready to be sold, is less than the total amount of liens (their loans in particular but they will also include mechanics liens as part of the total encumbrances). Bottom line is that their appraisals will support a determination that there is no equity for the Debtor(s). In other word the property is over-encumbered.
With this data in hand they will file motions for relief from the automatic stay under Section 362. Kara (through Traxi) will have to make a decision on whether to oppose the motion. To succeed they will need to hire their own appraiser (another cost relating to the hiring of professionals).
The focus of the hearing on these motions will be a battle over appraisals. Putting on my cynical hat, we jokingly called the Appraisal Institute's MAI designation (http://tinyurl.com/y2xze5) as actually meaning "made as instructed." In other words expect lender ordered appraisals to be lower than Debtor ordered appraisals.
Been my experience that bankruptcy judges simply average these two appraisals when determining the property value. If the encumbrances exceed the property value, relief will be granted. If not (meaning there is equity) the Court will either deny relief without prejudice (meaning the lender can re-file later) or set a specific "drop dead" date down the road when the lender can foreclose.
Now you might ask why mechanic lien claimants are all for this Traxi “crisis management.” Answer is simple. If the lenders are granted relief from the stay and complete their foreclosure, this action will “wipe out” mechanics liens in most cases.
Two interesting quotes from today’s Asbury Park Press article on the website are displayed below (see http://tinyurl.com/ycomkp ). According to my count of weeks, it looks like February 10th is the next key date. I’m guessing all that will be done between now and then is nothing actually productive. On the destructive side of the coin, $2.6M will disappear into the hands of Chapter 11 professionals (and a few others like security guard services).
I agree with Attorney Schwartz but I have a better analogy. Years ago a family friend had a terminal disease. I visited him in the hospital the day before he passed. He was in a coma and a nurse was in the room giving him a unit of blood. I asked why, given his condition. She said it would help him rest better. I suspect the real reason was the expiration date on the blood was about up.
Don’t think for a moment this is anything other than giving the appointed Chapter 11 professionals an opportunity to make money. So sad…….
-----------Quotes---------------------
Kara, which has struggled to find any money to pay bills and has seen other loans fall through, lined up financing over the weekend, Bruck said. The $2.6 million loan will stabilize the company for 13 weeks and pay for Traxi as well as administration, rent, security, and insurance expenses. The loan doesn't include money for any construction.
The lawyers for the largest creditors said they suspected the case would be back to the beginning in 13 weeks. "We're trying to feed lobster or filet mignon to a patient that's already dead," said Joseph Schwartz, a lawyer for North Fork Bank. "It doesn't work."
Thanks again, that post answered a few questions I hadn't even asked yet, LOL.
BTW if any former coworkers ever want to BS write me at akaks65@yahoo.com, love to hear from you. To uncover my true identity, you'll have to decipher a series of clues, each more diabolical than the last.
Now that the KARA people have their own blog, how 'bout refocusing this blog on the ENTIRE Jersey Shore RE market!!
Unfinished Kara work on town's to-do list
Posted by the Asbury Park Press on 11/15/06
BY JAMES A. QUIRK
FREEHOLD BUREAU
MARLBORO — To finish roads and drainage systems in three developments abruptly left incomplete by Kara Homes Inc., the Township Council has authorized an attempt to claim the $4.75 million in performance bonds posted by the troubled company in 2002 and 2004.
Kara Homes Inc., based in East Brunswick, is one of the largest builders in Monmouth and Ocean counties. The company filed for Chapter 11 bankruptcy protection on Oct. 5. It owes creditors — including banks, suppliers, employees and customers — $227 million.
Three Kara Homes developments in Marlboro stand unfinished: Emerald Hills, Buckley Estates and Crine West. Half the homes in Buckley Estates and Crine West have not been built.
"We're committed to protecting our residents, and that's what we're doing," said Mayor Robert Kleinberg. "We'll go through any measure to make sure residents aren't hurt by builders, so we're going to try, to the best of our ability, to complete the (infrastructure) work Kara Homes will not do."
At all three developments, roads await final paving. A ride through each neighborhood reveals storm-sewer drains and detention basins that are unfinished, large mounds of unmoved topsoil surrounded by black tarp fences, and piles of random construction materials and debris. The scene is most jarring in Crine West, where rows of completed $1.3 million homes border on wooden frame skeletons and poured concrete foundations of houses that may never be built.
Officials with Kara Homes could not be reached for comment Tuesday.
Township Construction Official Joseph LaBruzza said that since the company has filed for bankruptcy, Kara Homes has essentially abandoned finishing the work at the three developments. This left the council little recourse but to use the developer's performance bonds.
A performance bond is issued by an insurance company to guarantee the completion of a project by a contractor. It's a type of insurance policy that can be used by a municipality in the event that a project goes awry.
The council also authorized using $257,000 in cash bonds posted by Kara Homes for Crine West and Buckley Estates, Township Attorney Andrew Bayer said. Cash bonds are generally posted by a developer to pay for municipal inspection fees.
The township has already had to dip into its own coffers to fix problems in the three Kara Homes developments. Last week, Marlboro paid the Sakoutis trucking firm $18,000 to remove 12 large trash bins from the three developments. They were filled to the brims with garbage and construction debris and were attracting animals, according to LaBruzza and Township Engineer James Priolo.
It is unclear what will become of the approximately 300 homes across New Jersey that Kara Homes has yet to complete.
On Monday, state Superior Court Judge Michael B. Kaplan, sitting in Freehold, ruled that company owner Zuhdi Karagjozi can hire Traxi LLC, a New York firm that specializes in rebuilding beleaguered corporations.
Kaplan's decision at least temporarily delays efforts by the U.S. Trustee's Office, which wanted the judge to replace Karagjozi with a trustee to oversee Kara Homes' reorganization, including the completion of homes under construction.
North Fork Bank, which is owed close to $22 million, wanted Kaplan to convert the case to a Chapter 7 bankruptcy, which means the company's assets would be liquidated.
Kaplan said Monday he will not yet consider converting the case.
James A. Quirk: (732) 308-7758 or jquirk@app.com
------------------------------------
Terrible shame how those properties fell into such a sad state, despite the best efforts of many good people. The site has been in this condition since early in the year. Imagine dropping a million plus on a new home and being surrounded by unfinished, dilapidated shells of homes, garbage dumpsters overflowing with trash, unpaved rutted streets, etc. This is the true face of Kara Homes right now, unfinished, neglected, abandoned jobs rotting away while fast-tracker sweats his "reputation".
Expect the insurance companies that issued the performance bonds relating to Kara's developments to become more active as they are pushed to make good on their bonds. Their initial response is likely to attempt to convince governmental entities to wait for Kara to get on board with its reorganizational efforts because Kara will solve the problems. I seriously doubt any municipality will buy into this delay attempt and they will press for completion of work associated with the issued performance bonds just like this township is doing.
Expect insurance companies who are being called upon to make good on their performance bonds to focus collection activities on Zudi immediately. This result will of course result in Zudi filing his own personal Chapter 11 proceeding.
Looks like there may be some good news for those who were unpaid for the three weeks immediately prior to Kara's bankruptcy filing. According to the article that appears at: http://tinyurl.com/yeq99d
"Kara's expenses over the next 13 weeks include: $808,000 for payroll; $540,000 for insurance; $450,000 for professional services; and $75,000 for security at its developments. Kara's budget also includes $318,000 for payroll and $411,000 for insurance that it owed before the company filed for bankruptcy."
What this tells us is that some of this $2.6M loan is being used to pay pre-petition payroll. I do find it interesting that post-petition borrowings are being used for this purpose, and that has me wondering if this is an effort designed to reduce Zudi's personal non-dischargeable (through bankruptcy) liability, likely associated with unpaid withholding taxes.
In an earlier posting I suggested that if a “white knight” lender appeared on the scene it was likely connected with Traxi. That belief appears to be confirmed in the article which states, “(T)he agreement allows Bear Stearns to back out if Mandarino leaves as chief restructuring officer.” Note that during the specified 13-week period this $2.6M is designed to fund, Traxi estimates its share will be $450K. That works out to $34,615 a week. Saddling this Debtor with this additional financial management expense is, in my humble opinion, like putting a 300 pound jockey on Sea Biscuit and expecting the horse to win the Kentucky Derby.
Take care all.....
"I seriously doubt any municipality will buy into this delay attempt and they will press for completion of work associated with the issued performance bonds just like this township is doing."
I doubt it too. These issues have plagued the company all year at more sites than just the three in Marlboro. I would expect similar scenarios to play out at several other sites as well. Not to mention the unresolved issues facing several long-completed sites, too.
Many of those standing frames that are not weather tight may have to be re-sheathed or even possibly re-framed if they sit through the winter. What homebuyer would even want their home after being exposed to the elements for months? "Can't-wait" to find out.
Hey disgruntled goat - you seem to have alot of inside info on Kara and Zudi. Where you once part of his inner circle and got screwed, hence your willing to share all this info? My guess is you were a "corp guy" that never quite made it to the inner circle.
He could never have been a "made guy". He wasn't part of "the family". Genetic tests revealed that he doesn't posses the clueless gene.
Admin,
PLEASE turn on date stamping along with the time stamping, so those of us who check in daily can see where we need to pick up..
Thanks!
AHHHHHHHHHHH!
Thank you!!!!!!!!!!!
I wish I could have gotten Kara to hit my punch list this fast!
to James Quirk.....Judge Kaplan is a Federal Bankruptcy Judge who sits in Trenton
FOr everyones information, there is a clause in the Bear Sterns agreement that states no monies can be used for pre-petion expenses salary expenses only pre-petition expenses that can put the company at risk, ie Insurance.
Word at corporate is that Perry M is not keen on paying pre-petion salary out the the 2.6 mill.
My guess is he will hold the pre-petition monies until after the 13 week reorg. HE will than pay out any prepetion monies from the proceeds of closings (if Kara can get Bear Sterns to give them more money in 13 weeks)
Think about it, payroll is probably 90K a week times that by 13 weeks you get 1.17 million (about) and if 450K is going to traxi and they have 13 weeks of utilites, rent, insurances, they will not have enough left over to pay the pre-petition wages
The results of my genetic tests were ordered permanently sealed. The only circle I was a part of was the same one as everyone else, that being the wacky merry-go-round that was Kara Homes Inc.
Fuck it. If we don't get paid, put the hit out on Zuhdi. He's got to pay one way or the other.
Anon 8:32:11:
The payment of pre-petition wages, while certainly practiced in pre-packaged Chapter 11 proceedings (where the debtor enters bankruptcy with post-petition financing in place) would be inappropriate in my opinion in this case. Those who have "stuck around" are unlikely to leave simply because they have to wait until their pre-petition wages get paid through a normal claims distribution process.
The more I read newspaper reports and the information provided on this blog, the more I become convinced that this case explains why our bankruptcy system is a failure. If there are unencumbered assets (and I suspect that is a big "IF"), then they will be eaten away as Traxi professionals waste valuable time increasing the overall liabilities (thus hurting secured creditors) while they do their high priced investigation of the Debtor's financial condition.
One final comment and I'll close. Anon 8:30 posts a reminder that Kaplin is a Bankruptcy Judge (the article's author has him sitting as a State Court Judge). Never make the mistake of telling a District Court Judge that they are on a par with a Bankruptcy Judge. In one Federal Courthouse that I'm familiar with, bankruptcy judges are not allowed to ride on the elevator reserved for judges. Rationale? They are not Article III Federal judges.
Kara Homes may fire more workers
See article at:
http://tinyurl.com/yzsc94
They already did, today 11/16/06 - Bear Stearns people are out visiting some sites
Good Luck
I have spoken to my broker at Wells fargo at 1pm and they have released 10 houses to close asap if possible tommorrow, he said they will use that money to start more construction. He just got the fax at noon, I was surprised! but its starting to look a little better.My house at mays landing is 90 percent done, I still have a place to live at,but my heart goes to you guys who has to stay at a hotel or apartment until the your homes are built, I purchased the house on oct 9,after the bankruptcy, and i was promised a closing date of november 27, They should of just told me that I will not get the house till after all the legal matters are taken care of. I live in a k hovnanian home and also bought a baker home at south amboy,which i sold recently, Let me tell you,all of these guys work the same way ,They pay off the right people and in return get away with alot of things.
Translation-the salespeople are gone. Wonder if Tom kept his lofty position?
Please people, refrain from making those slanderous and malicious posts about individual Kara Homes employees past or present. Every time it is done, some moron posts thousands of lines of text to the thread in an attempt to disable it. Starting your own blog is free and easy and it would be a more appropriate forum for that kind of thing, if you feel you must stoop to that level.
So what Happened to all those great sales people Zudi lied to
was tom able to keep them around like Lisa , Kevin , George
well does kara have a company anymore or what Zudi I know you will come back maybe another state where they do not Know you and have not had any of the Juice. well all you people that made Zudi go and Make another Zudi.
PLEASE! Coherent sentences. NO WORD SALAD!
I was at the meeting today. Zudi is certainly in a precarious position. The judge allowed $350,000.00 to keep Kara going for 2 more weeks. Wether or not he will be given the rest of the 2.6 mil. is questionable. That hearing is set for November 29th.
Uncle Hector is released - within ten days. Zudi seems to be skating on thin ice now. I'm still hoping he pulls it out.
I thought the 2.6 mil was already approved?
hey - any of you poor people that are waiting for a place in the lakewood development (over 55)- i own a furnished model and would rent to you for under market so you have a place to stay - if interested leave ur email.
Here's the article from APP.
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Judge approves smaller loan to keep Kara Homes in business for two more weeks
Posted by the Asbury Park Press on 11/16/06
BY MICHAEL L. DIAMOND
TRENTON — Heeding complaints from creditor banks, a federal bankruptcy judge today approved a truncated deal to lend Kara Homes Inc. $350,000, enough to keep the beleaguered company alive for at least two more weeks, but not the $2.6 million the company was seeking.
Kara had reached a deal with investment bank Bear Stearns for the larger loan, expecting it would help keep the East Brunswick-based home builder afloat for at least 13 weeks while it reorganized. Kara filed for Chapter 11 bankruptcy protection last month, creating financial uncertainty for hundreds of banks, subcontractors and home buyers while reporting assets of $350 million and liabilities of $227 million.
Banks that are owed money by Kara objected to the loan at a hearing in Trenton yesterday, arguing that certain parts of the deal gave Bear Stearns too much power. For example, the investment bank would have final say-so over any sale of Kara assets.
The parties compromised on the lower figure, with Bear Stearns keeping its power for now. The argument will be taken up again in Judge Michael B. Kaplan's courtroom in two weeks. It is unclear if Bear Stearns would still agree to issue the larger loan without the same degree of power over the company.
Michael L. Diamond: (732) 643-4038 or mdiamond@app.com
The short fused nature of this decision is telling. I think the Judge is finally getting the message secured creditors have been attempting to get him to understand.
What we have here is clearly a mess. Any way you cut it, this is simply a situation where the plan (if you can call it that) is doomed to failure. The reason has more to do with market conditions than anything else. If residential property was an appreciating asset today it might be a different situation. But as I suspect we all know, properties on new homes are going down at a rapid pace. It is not uncommon today to see reports that indicate a drop of over 10% in values over the past year.
This bankruptcy should be recognized for what it is. A salvage effort. The claims of secured creditors (lenders and mechanic lien claimants) likely exceed the value of most of the properties that are under varying degrees of completion. If that's the case a Chapter 7 trustee would do the correct thing, effectively abandoning the non-assets and allowing the secured creditors to proceed with their foreclosures.
If there are any unencumbered assets out there, or assets where the debtor has equity, a Chapter 7 trustee could effectively sell those assets and convert them into cash for distribution to unsecured creditors. One other key point. Chapter 7 trustees often abandon over-encumbered assets based upon an agreement with the secured creditor that they will abandon any unsecured claim they may have in consideration for their being allowed to proceed with foreclosure. If that is done, it will effectively reduce the total amount of unsecured claims, thus increasing the amount other unsecured claimants will receive as the result of a distribution to unsecured creditors.
I guess what I'm suggesting is that it would be in the best interests of all creditors to stop this bleeding, discontinue the charges associated with reorganization expenses, and put this case into a productive mode of Chapter 7 liquidation immediately.
The Bear Stearns financing appears to be conditioned upon Perry Mandarino being appointed and continuing as the Chief Restructuring Officer of the Debtor. My immediate reaction was to assume that there is not the sort of independence that one would assume would exist for such a position. All one has to do is a simple Google search using key words “Perry Mandarino” and “Bear Stearns” to uncover a prior working relationship related to NationsRent. I’m not saying that there is anything improper. Just would like to know if this relationship was disclosed to the Debtor’s creditors and to the Court.
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Quote from: http://www.usdoj.gov/ust/eo/public_affairs/articles/docs/abi_feb2002.htm
“As a result of these negotiations, a set of protocols were developed that would permit debtors in possession to employ the expertise of crisis managers as part of their management, but still provide safeguards of notice and opportunity to allow creditors and other parties in interest to object to the employment of the firm.
Under the protocols, the crisis management firm can allow one of its members to serve as an officer or director of the debtor in possession, or the crisis management firm can be retained as a professional. It cannot serve in both capacities. If the crisis manager supplies an individual who serves as an officer or director, that person and the crisis management firm will be subject to 11 U.S.C. § 363 (use, sale or lease of property), and will be required to provide disclosures of any relationship with the debtor, creditor, lenders, and others. If the crisis manager is to provide non-management advisory services, the firm will apply for retention as professionals under 11 U.S.C. § 327.
Currently the protocols apply to cases filed in United States Trustee Region 3 (the Third Circuit, comprising Pennsylvania, Delaware, and New Jersey). However, they have been shared with all United States Trustees, to use as guidance in cases in other parts of the country and with different crisis managers or turnaround specialists. The experience gained may result in the development of a national set of U.S. Trustee policies and procedures to govern the employment and retention of turnaround specialists.”
Earlier a poster refered to the person that is jamming up the blogs that contain vile personal attacks as a moron, I am comfused as to whiy they feel this way. A corporation Kara Homes did some things that former employees, homeowners, home buyers, sub-contractors and lending institutions have issue with. Why does this give anyone a liscense to personally attack any individual that wasn't an officer of the company. What difference does it make if a CA in Winding run was sleeping with someone or a construction manager at Pennington could afford to loose a few pounds. If those that were damaged by the events that are transpiring at this time feel as though it gives them some sort of closure by trashing those that are still with the firm, please limit it to those who had some actually influence in what occured. Bottom line line is-every time it gets personal, this "moron" is going to SHUT IT DOWN. Have a nice day and rember Kara Cares.
Why include references to two specific people in a rant about not making it personal?? That's no more fair than any of the other attacks were.
I was making up people-I have no idea who was the CA at Winding and to the best of my knowledge no one was hefty at Pennington. Just trying to show how ignorant the personal attacks were.
Fully agree re: ignorant & uncalled for. Very poor form, bad for karma too. What we need here is a big group hug, warranty style.
IS that you Uncle Phil?
Does anybody know who got let go this week? Is it true about Uncle Hector? What about Robbie?
Hector was let go. Hector's wife (is that Robbie?) is staying.
Phil was the best wuarantee guy I ever worked with. It took a lot out of him dealing with corp, I know that. He was A+. Is he working now or did he decide to hang up his bulletin Board?
Last I heard Uncle Phil found a home at another company that appreciated his experience and expertise...hear that steph...experience and expertise.
OH please, Phil L was a nice guy but he couldn't manage his way out of a paper bag.
He made a great warranty guy but he should have never been made a manager. He had a great attitude but he managed his department like a 7/11. He was never a leader but a follower that was afraid to step out of Patrick Goldens shadow.
He would not have been pushed out the door by senior managment if he had a set of balls on him.
Like I said, nice guy good warranty worker, horible manager!!
That goes the same for that idiot Michelle he hired what a waste of space.
The people who worked for Phil respected him, which is alot more than any other manager at KH could say. He was always reachable, and was one of the very few that followed through on what they said. his word was GOOD. He stuck up for his department and did his best to keep the homeowners happy. After the closing, the main office pretty much washed their hands of those houses and left it up to warranty to clean up constructions messes. Things were at least under control when Phil was in charge. Once he left (and good for him!) it was the RZ show and everyone knows what an idiot he was!! He ran around like a chicken without a head, and NO ONE in warranty had any respect for him! His only friend was Robbie and we all know how 99% of KH felt about her. As for Michele, she went to work everyday, worked her butt off and did her best to help the homeowners. She was one of the few employees the showed "Kara cares". Maybe she was a little tough with people, but that was because most of the people at corp wer complete morons. Michele was organized and knew how to keep proper documentation. How many other people in corp can you say that about? Funny how after Phil and Michelle left, Quality control went in the toilet.
Blame Zudi for putting the dept. in the hands of someone with no exp. at all in building. What the hell was the deal with that? That whole arrangement was pretty fishy.
Thanks for the info on Phil L. KH didn't deserve him.
My first Kara WTF? moment was the first time I heard Stephanie talk.
LOL, and hearing Zhudi speak for the first time. Can you imagine Troxi's WTF? moment the first time he got Z alone to discuss the business?
He's still building his airplane, just needs the money but the evil banks are holding out. Ha Ha. The loser.
Is it true that Zudi's boat sank over the weekend??? Maybe he is going to try to collect the insurance
Maybe Zudi had Phil work on the boat just like he works on Zudi's cars from mechanic to vp of construction..way to go You pick them well Zudi. look at all the people who still Believe there must still be alot of ZUDI JUICE Around better get some while it lasts I guess all the lenders STOPPED DRINKING FROM THE CUP!!!
The reference to Zudi building an airplane is from a speech Zudi made several years ago where he compared the way his company was growing to "trying to build an airplane while your flying".
If Zudi's boat did sink my guess would be his fat wife (Laysbeth, what a stupid name) must have sat in the boat and it sank!!!!
DO you think Zudi's wife buys into his bullshit or is she just a Stepford wife??
Please discuss.
She is just like him, maybe smarter. Now's her chance to strike back and screw Zhudi right back since she has all the assets in her name. Think of it. If she changed the locks and got a restraining order, she'd be kicking him to the curb big time, and he would be relying on her for lunch money. Could you see Mr. Empty Pockets eating turkey dinner at the Parker Center with some of the people he screwed?
Cut and run now Lezabith while the going is good and you'll be a hero.
I heard there are wads of cash being fished out of the Shrews and the cash trail leads to Zman's lagoon. Is that true?
I also heard a rumor Zman's next escape attempt will be to hijack a bus to Cuba.
If the boat thing is true Zuhdi's boat was nothing special anyway. I saw it in the "Kara Cares" promo video. It's only like a 28' day-fisher worth $30-40k tops. Barely worth the insurance fraud....
Sure there's a boat. Zudi is the captain, there are ten first mates, there's no engine or sails or rudder and it takes on water unless you constantly bail.
No airplane but Zud's Beemer was converted to run on ego power. Now it goes from 0 to 600MPH in a tenth of a second.
Rumor has it that if things get tight on payday, employees will be paid with the model furniture that has not yet been looted.
In other news, the unfinished clubhouses will now be known as 'activity centers'. The activity will be finishing the clubhouses. It will serve as a nice do-it-yourself type woodworking project for the over 55 crowd. For fresh air and good exercise, building can't be beat. Studies show it may reduce cholesterol! First come first served, bring your own tools & supplies, please.
Finally, the 2006 Kara Homes calendar is still available, in limited quantities. Get them while they last! Next months featured house: one of the finished ones!!!
Does anyone have a date for the Xmas party yet? I want to make sure I am there!
Yeah the party will be held at the Federal COurt house with Judge Kaplan bringing the punch!!!!!
The 2006 Xmas bash is at Tom's house at the Tradewinds. He told me to tell you all to invite everyone as it is going to be a rager! Free beer for the first 200 guests. Bikers welcome!
I think Tom sold that house. I remember Tom beating up Phil Maconi to get the house done so he can get rid of it.
Is it true Tom J had a hair piece??
no its hair club for men
he is the pres. Zudi is a member
Tom did have phil fix and it was sold
No one bought that Tradewinds house, saw it three days ago & it's still up for sale.
' why is everyone posting anonymous ' ? how many of you have owned a business and met a weekly payroll ? this is no fun for anyone as you judge so shall you be judged
I never owned a business. I've worked for a few, though. All of those businessmen paid me, unlike Zudi. No sympathy here for him. You can't make payroll, you let me go, but you never deceive me into working and wasting my time for nothing. Maybe I'll be judged, but Zudi's getting JUDGED for real right now & he deserves it.
yeah, poor poor Zuhdi, cant pay his bills on time & wants to be treated special because he tried so hard to get rich. bad break.
I wonder if Zudi will stand up in court and demand the judge give him enough money for his kids college fund! (another famous quote from a zudi speech)
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