Fremont General unsecured creditors ask court to deny exclusivity extension

By Caroline Salls

Pittsburgh, Oct. 7 - Fremont General Corp.'s official committee of unsecured creditors objected to the company's proposed extension to its exclusive periods to file a plan of reorganization and solicit votes on the plan, according to a Monday filing with the U.S. Bankruptcy Court for the Central District of California.

The committee said the extension should not be granted in light of recent adverse developments in Fremont's bankruptcy case and its "unwillingness to focus its efforts on working on a plan consistent with the economic realities of this case in a manner designed to reduce administrative expenses."

According to the objection, the company "has failed to demonstrate cause for any extension of exclusivity, let alone an extension until the end of January 2009."

"Instead, the debtor presents in its motion a series of generalizations and half truths in an effort to convince the court that the debtor now should be given an extended period to pursue various illusory reorganization alternatives," the committee said in the objection.

In addition, the committee said Fremont is a holding company and has not faced any of the operational issues that sometimes divert the attention of other operating debtors in possession.

Also, the committee said the company was not forced into bankruptcy on an emergency basis by a creditor or lender.

"The debtor decided to use Chapter 11 for a pre-planned purpose - consummation of the CapitalSource transaction entered into before the bankruptcy - which was achieved more than two months ago," the committee said in the objection.

The committee said most of the assets of Fremont's subsidiaries have been sold.

"The undisputable fact is that the businesses that the debtor and its subsidiaries were previously engaged in have already been terminated and cannot legally be reestablished," the committee said in the objection.

"Indeed, the one and only third party that has presented a possible proposal for a plan in this case has essentially proposed to take over from the debtor the wind down of the estate in exchange for consideration."

Meanwhile, the committee said the company's value is deteriorating and its cash is depleting as a result of professional fees, continued costs associated with the wind down of Fremont Investment & Loan and the absence of meaningful income-generating activity.

If Fremont "is granted more time to pursue unconfirmable schemes as the estate continues to deteriorate under the weight of administrative expenses," the committee said the interests of the creditors and equity only will become more divergent, "as equity concludes it has become entirely out of the money as result of the dissipation of the estate's assets and its only hope of recovery is to try to hold creditors hostage."

"Any notion that the debtor (supervised by a board of directors appointed by their departing predecessors) should have an extended monopoly over the plan process is wrong," the committee said in the objection.

As previously reported, Fremont wants to extend its exclusive plan-filing period to Jan. 30 from Oct. 16 and the solicitation period to April 30, 2009 from Dec. 15.

Fremont said it needs more time to consider its restructuring alternatives and formulate a plan now that it has closed on its key sale transaction with CapitalSource.

A hearing is scheduled for Oct. 16.

Fremont General, a financial services holding company located in Santa Monica, Calif., filed for bankruptcy on June 18. Its Chapter 11 case number is 08-13421.

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