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Judge signs off on Centrix Chapter 11 plan
DENVER (1/22/08)--A U.S. Bankruptcy Court judge Thursday approved the outline of auto lender Centrix Financial LLC's plan to exit Chapter 11 bankruptcy and repay its creditors. The ruling by Judge Elizabeth E. Brown in the U.S. Bankruptcy Court in Colorado means the liquidation plan can be sent to creditors for a vote (Associated Press via chron.com Jan. 18). The Centennial, Colo.-based Centrix, which financed subprime auto loans for credit unions, proposes to pay creditors with proceeds from any successful litigation and from the remaining proceeds from selling its assets to Kendrick CF Acquisition Inc, now known as Peak 5. That sale closed on Feb. 23, 2007, at roughly $30 million. Unsecured creditors' recovery will likely depends on whether Centrix can pursue claims against its CEO, Robert E. Sutton, who helped establish Kendrick, said AP. The company said the claims against Sutton and other non-debtor insiders and entities are critical assets of the debtors' estates and likely will be the key source of any meaningful recovery. Centrix and its creditors committee identified potential claims of more than $100 million against Sutton for fraud and breach of duty to the company and its creditors, according to AP. It proposes to repay all administrative claims, including fees charged by professionals it retained during the case, in full and estimates these at $3.3 million. Centrix and its seven affiliates under bankruptcy protection plan to consolidate into a single entity, with Centrix assuming the affiliates' assets and liabilities. It will pool assets to repay each affiliate's creditors. The company and its committee of unsecured creditors supported the plan because the affiliates have intertwined, dependent relationships and operated together as a single business enterprise. Creditors can vote on the plan through March 4. Brown will conduct a hearing 10 days later to consider whether to confirm the plan Centrix was placed under involuntary Chapter 11 protection on Sept. 15, 2006 by creditors IFC Credit Corp., Suntrust Leasing and Wells Fargo Equipment Finance Inc. It owed them a combined $4.6 million in lease payments. Several days later it and its affiliates filed voluntary petitions for Chapter 11. According to News Now (Jan. 23, 2007), more than two-thirds of Centrix's portfolio is owned by about 230 credit unions across the nation. It has partnered with more than 300 financial institutions and underwrote more than 250,000 loans totaling $4 billion (News Now Sept. 6, 2006).


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