McStain bankruptcy dismissed

DENVER – A judge has accepted McStain Enterprises’ request to dismiss its bankruptcy case.

The former Louisville-based homebuilder made the request on Nov. 12, saying it would have better success reorganizing the company out of bankruptcy.

Although the case is dismissed, Judge Howard Tallman ordered McStain to keep the former bankruptcy committee updated on all meetings, monthly balance sheets and income statements.

McStain filed for bankruptcy on May 28, 2009, falling victim to the housing bust and a difficult credit market. At the time of the bankruptcy, the company owed creditors between $10 million and $50 million. McStain founders Tom and Caroline Hoyt co-owned the company with their employees through an employee stock option plan.

During its six months in bankruptcy, McStain said it was able to resolve several litigation issues, expose its assets to potential investors, continue discussions with secured lenders, and sell 18 housing units and lots, which have reduced secured debt by $3.8 million and resolved $600,000 of liens.

Part of the recovery outside of bankruptcy includes a possible investor, which may purchase KeyBank’s secured loan in the case, and then work out a deal with McStain.

“Dismissal will allow McStain’s secured creditors to protect their positions and benefit from any workout to be structured with the future holder of the KeyBank secured loan,” the motion states. “Unsecured creditors will receive payments from the proceeds of the disposition of assets of the existing McStain.”

McStain’s initial bankruptcy filing listed insurance brokerage firm Hub International-Scheer’s Inc. as the top unsecured creditor in the case with a claim of $10.85 million. It was followed by Key Bank with a $3 million claim, Boulder-based Crestone Capital with a $2 million claim and Boulder-based William and Associates with a $1.54 million claim.

Thirteen other unsecured creditors were listed claiming less than a $1 million each, including Eric Wittenberg, former McStain chief executive officer, First National Bank in Boulder and Boulder-based Namaste Solar Electric Inc.

McStain officials said the company would retain the right to re-enter Chapter 11 bankruptcy, “should any creditor maneuver to exceed its legitimate rights relative to others,” but they don’t not expect that to be the case.

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