Judge rejects Lake Las Vegas dismissal plea

5 October 2009

By John G. Edwards

LAS VEGAS, Nevada -- Bankruptcy Judge Linda Riegle on Friday denied a motion filed by Ronald Boeddeker's Transcontinental Corp., former owner of Lake Las Vegas, to dismiss the bankruptcy case filed by the Henderson resort community.

The bankruptcy case was filed in bad faith and was running up expenses for the 3,600-acre community, Transcontinental attorney Christian Onsager argued in the motion and oral arguments.

The judge rejected those arguments and complained that Transcontinental waited more than a year to file the motion.

Since then, the debtor companies and creditors have prepared a plan of reorganization.

Riegle acknowledged concerns about the relationship of investment banker Credit Suisse and the Atalon Group, a turnaround management company.

Credit Suisse took over Lake Las Vegas in January 2008 after Transcontinental defaulted on $540 million in loans. Credit Suisse then turned ownership and management of the 3,600-acre golf course resort over to Atalon, which filed for bankruptcy protection in August 2008.

"I am troubled in this case by the relationship between Credit Suisse and the debtor," Riegle said. However, she said the bankruptcy court was a good venue for resolving issues.

Transcontinental still may oppose confirmation of the plan of reorganization for Lake Las Vegas, Riegle said.

If Transcontinental persuades her at that point, she could dismiss the bankruptcy or convert the case to a Chapter 7, allowing for liquidation of assets.

Attorneys for the unsecured creditors committee suggested Transcontinental wanted the bankruptcy dismissed because Lake Las Vegas may sue Transcontinental if it emerges successfully from bankruptcy court protection.

Lake Las Vegas President Frederick Chin filed papers criticizing Transcontinental for pocketing $470 million in cash from a $560 million loan made to the resort in 2004.

Transcontinental left Lake Las Vegas with "significant unpaid bills, considerable pending litigation and many unresolved and seemingly insoluble problems," Chin said in the filing.

Contrary to arguments from Transcontinental attorneys, Chin said, Lake Las Vegas has an ongoing business, which includes selling land at the project and running the Yacht & Beach Club.

Riegle scheduled confirmation hearings to start on Dec. 15.