SC creditors in Panthers headquarters bankruptcy rally to move action closer to home | Company
South Carolina and Delaware are lined up on opposite sides of a legal turf war that, in football parlance, is heading to the stand for official scrutiny.
At stake is an unusual trophy: the right to host the developer’s bankruptcy proceedings behind the $800 million Carolina Panthers headquarters and practice site in York County. .
Team owner David Tepper formed GT Real Estate Holdings LLC to acquire and manage the NFL-rooted sports, entertainment and office destination in South Carolina. The company halted construction on March 7, after sinking about $170 million in I-77 dirt, and filed for bankruptcy protection on June 1 as part of a plan to reduce activity in an orderly fashion.
The stunning turn of events capped a blame game that erupted between the hedge fund billionaire and the town of Rock Hill after $225 million in public funding for roads and other infrastructure works failed to materialize at time.
With a mailing address across the state line in Charlotte, Tepper’s GT chose temporary shelter from its debt collectors hundreds of miles away in Wilmington, Del., where it was constituted.
The move put some of the companies and government agencies with financial interests in the Panthers’ failed development into full defensive mode.
Leading the charge is the biggest creditor on the land: Mascaro/Barton Malow, the general contractor on the 234-acre campus. The joint venture estimated that it owed about $80 million.
Mascaro/Barton is now easing its eight-figure claim and asking a judge to return GT’s bankruptcy case from the first state to Palmetto State. As of last week, 11 small creditors have filed documents in support of the claim, including the City of Rock Hill, SC’s Department of Transportation and a handful of contractors.
Mascaro/Barton said South Carolina is “by far the most convenient forum” for most creditors and others interested in GT’s bankruptcy.
Also, the deal will likely center on the sale of real estate in the state – the unfinished Panthers project.
And GT would not be harmed, in a legal sense, if the proceedings were moved out of Delaware at this early stage, according to the contractor.
“The underlying operational facts of this case all center in and near South Carolina,” he argued in a June 24 court filing.
GT doesn’t give up a yard, saying “Mascaro/Barton’s real motivation is clearly to gain a litigation advantage and has nothing to do with ‘convenience'”.
The Tepper-owned company added that “the delay and uncertainty caused by a transfer of this business … could compromise” its “access to financing and impair its ability to maximize the purchase price of its assets to the detriment of all stakeholders”.
The “central question” is whether uprooting the litigation and moving it to South Carolina would “in fact make it easier, faster, or cheaper” to administer.
“The answer here is a resounding ‘no’,” GT’s attorneys wrote in a lengthy rebuttal on Tuesday.
While this specific case is new, the underlying problem — known in the bankruptcy business as “place shopping” — is old.
For years, failing businesses have sought to iron out their financial troubles in the courts of Manhattan and Delaware, which are renowned for being exceptionally experienced at dispensing with complicated insolvency cases. They are also seen as friendly towards corporate debtors.
In this case, it could be argued that both sides are looking for a judicial version of a home field advantage.
Almost every member of the National Association of Attorneys General has attempted to change this quirk of the legal system. The bipartisan coalition, including Alan Wilson of South Carolina, pushed for federal legislation that would prevent broke companies from filing far from their main places of business or revenue-generating assets.
The group pointed out that individuals are required to file for bankruptcy in the same court district where they lived for most of the previous six months. Companies, on the other hand, can choose any court, so long as they have “a minor affiliated interest, however small it may be recently created,” the South Carolina AG office said in a statement.
“This leaves companies with a wide choice of possible locations, which can be manipulated to their advantage,” Wilson said.
They often head to Delaware, the incorporation capital of the country.
The debate over shopping for places is not new. Congress has considered the issue for more than 20 years. But it’s all been talked about so far, leaving individual judges to arbitrate the scuffles on a case-by-case basis.
Where GT’s bankruptcy will take place is currently under formal review – and a decision is expected to be announced soon. A U.S. bankruptcy court judge has scheduled a hearing on the transfer request for Friday in Delaware.