Although it took place at a basketball arena, it was nothing like March Madness -- or perhaps, in its own way, that's just what it was. On Monday morning, about 1,000 of Metropolitan Mortgage's creditors met with the reorganization team and each other at Spokane Veterans Memorial Arena. And on the podium -- alongside an impressive restructuring team -- sat Paul Sandifur Jr., the former CEO of Metropolitan Mortgage, a man who has been basically invisible since the company filed for Chapter 11 protection. Gathered in the Arena were a broad representation of investors from Spokane and North Idaho along with a few from Seattle and elsewhere. The predominant hair color was gray, and the median age was probably 60. Many dozed off during the long presentations; some left not long after they got there.
"Every time they go bankrupt, it's us, the people who are out," said Roy Peterson, an investor who had come over from Post Falls to be at the meeting. "My wife invested in this years ago. Now the little lady has passed on, and I'm looking at this."
The retired ironworker said he had received letters from neither Met Mortgage nor its sister company, Summit Properties.
"I have securities for about $10,000, but I figure the money is gone," he said as he was leaving a little after 10 am. "I don't want to sit through this. They're just a bunch of crooks. I don't want to listen to a bunch of guys talk. I'll just follow the reports in the paper and see what happens."
Some investors said they still supported Met Mortgage, even though the financial picture being rolled out on the basketball courts was very bleak.
"I'm still behind them," said Steve Muto, who owns more than $150,000 of debentures in Met Mortgage. "They said they are going to pay the debenture holders first -- that really surprised me, but I guess I should be happy about that. I mean, it's the only choice I have. If they don't come back up, everything is gone," he said.
"In 1980, they were looking pretty bad off, but they came back. But you look at someone like the younger Paul Sandifur sitting there and you wonder why his dad could run the company for 50 years without a problem and he can't."
So what happened? The Metropolitan Financial Group of Companies was founded in 1953 by C. Paul Sandifur Sr. Met Mortgage dealt with exactly that -- mortgages -- until the 1980s, when the company began to branch out dealing with commercial property and offering a host of financial services, including loans and annuities. By the summer of 2003, Met Mortgage had nine subsidiaries and assets worth roughly $2 billion.
By mid-summer 2003, Met Mortgage posted a $20 million loss. The company at the same time raised $76 million in debentures and issued $22 million in preferred stock. Since last June, however, federal regulators had the firm in their sights. Last fall, Met was prevented from issuing any more debt, and the companies' fates were sealed. By late January, Sandifur Jr. resigned, and on Feb. 4, both Met Mortgage and Summit Securities filed for Chapter 11 protection -- separately, but under joint administration.
Now a team of lawyers is working to untangle the mess. Here are the facts as they were presented on Monday: There are an estimated 30,000 creditors like Muto and Peterson, many of whom are small investors who placed $10,000 or less in Met Mortgage. Together, Met Mortgage and Summit Properties owe $470 million to creditors. Metropolitan Mortgage's board has resigned, but Summit's board is still acting and making decisions. Summit has an independent auditor; Met Mortgage is still looking to hire one after Ernst & amp; Young quit this winter. Creditor committees have been formed representing all investors in the two companies, and Met Mortgage now has until the end of June to file a formal written plan with the federal bankruptcy court proposing how to restructure and escape the financial mess it's landed in.
"There are no deadlines according to bankruptcy law, but only the company itself can file the plan within 120 days of having filed [for Chapter 11]," said Jake Miller, assistant United States Trustee and the person in charge of the meeting on Monday. "The plan is called a plan of reorganization, but it's legal also to propose a plan of liquidation. Regardless of which plan is chosen, the creditors get to vote on it. Half the creditors have to approve of it, or those representing two-thirds of the dollar amount in the plan. Sometimes in these big cases there is more than one plan. After the plan has been approved, the debtor has to comply."
The plan also has to be presented to and approved by the bankruptcy court. Creditors have until June 14 to file a proof of claim.
Bill Romney, interim executive officer and chief restructuring officer, pointed out that the Monday meeting really was the creditors' meeting.
"We appreciate you coming out this morning," said Romney, to a completely silent Arena audience. "My role is to help creditors recover as much as they can of their investment. Why not just use existing management, you may ask? Well, most often the requirement to hire a restructuring officer is imposed by stakeholders and creditors who are looking for someone who is independent. My primary job is to protect the assets of the estate and to ensure the maximum benefit for creditors." Although it might have seemed like a popular statement, no one applauded.
Romney then said one of three plans are likely to appear in June: One that calls for selling all assets, including Met's ownership in its insurance companies; one that calls for the sale of only certain assets; or a plan that conforms to the reorganization that was originally submitted.
"The first thing that's going to happen is that we'll continue to sell all real estate assets, including the Met Theater and possibly the Met Building downtown," said Romney.
Responding to a question from the floor, later in the meeting, William Smith, Met's chairman, assured stockholders that all assets are fairly evaluated.
"We have the major assets being valued right now at fair market value," he said. "Real estate appraisals are only one year old or less, so they are still current. We should be done with this process by April."
At this point, the meeting had gone on for almost two hours. People lined up on the floor and asked questions. Those saying they hadn't received letters and statements were asked to leave their names and addresses. Those curious about joining a class action suit were told to call their own lawyers. Those asking how much of their investment they could expect to get back, got basically the same answer: "How the company emerges from Chapter 11 will be determined by the reconstruction team," said Smith. "Depending on the plan adopted, that will define the timing and the amount of money you can expect to get back." Debenture holders can expect to be paid before preferred stockholders, especially those who purchased Met or Summit products between Jan. 1, 2001, and March 31, 2003 -- a period during which, according to the SEC, Met brokers were not completely honest. People who made their purchases prior to this time period may still get reimbursed, but that all depends on which restructuring plan the management team, creditors and bankruptcy court settle on.
By now, it was getting really cold inside the Arena.
Leaving alone or in small groups, many shaking their heads, creditors went hunting for lunch and perhaps more answers over coffee and conversation.
"You can't just blame the young Sandifur," said Bill Smith, a creditor who'd come over from Coeur d'Alene (and no relation to the chairman, William Smith). "I mean, what was the board doing? Just being 'yes men'? And what about Ernst & amp; Young? They bailed out, is what they did. You could never evaluate the annual report they sent out -- people just looked on the back and saw their logo and figured everything must be good. Isn't there a liability on their behalf, an accountability?"
So, is he hopeful about getting his money back?
"Right now, you're better off taking your money to Two Rivers Casino than doing any of this," Smith replied with a chuckle.
Another creditor said he'd first lost his investment in Kaiser and now everything in Met Mortgage. "It's like I've been shot twice in a year," he said, preferring to keep his name to himself.
The only one who drew any laughter from the crowd all morning was an older woman who -- after asking her question of the panel -- dryly replied: "Thank you. Thank you very much for almost nothing."
Met Mortgage has established a Web site on which bankruptcy proceedings, meetings, filings and comments will be posted. Visit: www.mtgbankruptcy.com. There's also a phone helpline for those filing claims. Call (866) 808-3557. The bankruptcy court has a Web site where cases can be followed as well. Go to www.waeb.uscourts.gov, click on 'Tracer' and enter 0400756 for the Summit Properties case or 0400757 for the Metropolitan Mortgage case. To reach the creditor committee for Metropolitan Mortgage, call 747-2052. To reach the creditor committee for Summit Properties, call 624-0154.
Publication date: 03/17/04