Category Archives: Bankruptcy

Countless celebrities have tried and failed miserably to strike gold in the retail licensing business. Jessica Simpson puts them all to shame.

Not only did Jessica create a brand that eventually generated over $1 billion in annual gross revenue, she also sold a majority share for a big windfall then re-acquired the brand out of bankruptcy in a corporate maneuver that would impress Gordon Gecko.

We have previously reported on Jessica Simpson's retail empire and the fact that she reacquired 100% ownership rights in November. But thanks to an in-depth interview that was just published by Bloomberg, we now know a lot more about the brand's nitty gritty financial details, from inception to sale to re-acquisition.

(Photo by Evan Agostini/Getty Images)

Back in the spring of 2005 Jessica Simpson was at the peak of career. Actually, she was at the peak of her FIRST career. She may not have even realized it at the time, but she was actually at step one of what would eventually be a much more impressive and lucrative SECOND career as retail mogul.

On March 30, 2005, Jessica's three-season smash-hit reality show, "Newlyweds: Nick and Jessica," aired its final episode. At the same time she was putting the final touches on what would soon be a critically-acclaimed turn in the film reboot of "The Dukes of Hazzard."

In the movie, Jessica took on the iconic role of Daisy Duke which had been made famous by Catherine Bach on the 1970s/1980s TV show. Thanks largely to a poster of Catherine (as Daisy) wearing super short jean shorts, that sold over 5 million prints, short denim shorts became forever re-named as "Daisy Dukes."

As the film's summer release date approached, Jessica and her mother/manager, Tina Simpson, began to take meetings with various merchandising companies to entertain partnership offers to launch a Jessica Simpson retail business.

The resulting business was called

The merchandising company Jessica and Tina settled on was called the Camuto Group.

The Camuto Group was founded in 2001 by Vince Camuto. Just two years prior, Vince sold the retail empire he co-founded two decades prior, Nine West, for $900 million. The Camuto Group positioned itself as experts in sourcing, manufacturing and shipping shoes for other brands. For example, when Tory Burch, Lucky Brands and BCBG wanted to launch a line of shoes without having to do any of the actual making of shoes, they tapped the Camuto Group. When Tory Burch had a huge hit with a $200 flat (which was a quarter of the price of similar rival flats), they were manufactured by the Camuto Group.

Jessica and Tina were impressed with the Camuto Group and hit it off with Vince. So a deal was struck where the Camuto Group would pay Jessica a fee to be the master licensee of her name on retail items. Vince also struck a side deal to acquire 25% of Jessica's brand outright.

You might assume, considering the movie's release, that the first product they made together was a line of Daisy Dukes, but Jessica actually wanted the first product to be a line of high-heeled cowboy boots. That's partially why she wanted to work with Camuto specifically.

The high-heeled boot was a huge success and new products were rolled out. Not just shoes either. The Jessica Simpson Collection eventually produced jeans, accessories, lingerie, perfume and more. Simpson and Camuto worked closely to oversee licensing deals on products in more than 30 retail categories.

(McCarthy/Getty Images for Jessica Simpson Collection)

According to the recent Bloomberg article, in 2010 the Jessica Simpson Collection generated $750 million in gross retail sales.

In 2014, the brand's peak year (so far), the Jessica Simpson Collection grossed over

Before you get too excited, Jessica's cut of those gross revenues was actually not all that impressive. The retail business is tough, with notoriously low margins. According to Bloomberg, in the year the brand grossed $1 billion, Jessica's cut was just $13 million. An impressive number for sure, but technically that's 1.13% gross revenue.

Unfortunately, Vince Camuto died in January 2015 after a battle with cancer. That left Tina and Jessica feeling aimless and needing a new partner. So, in April of that year, Jessica sold 62% of the brand to a company called Sequential Brands for $117 million. Vince Camuto's widow remained 25% owner and Jessica after the deal continued to own 12.5%.

With the sale, Jessica shrewdly included what would later prove to be an extremely brilliant deal point in her contract with Sequential. The contract required Sequential to give Jessica final approval rights if it were ever to sell the brand.

On the heels of their Jessica Simpson acquisition, Sequential went on a multi-billion dollar debt-funded brand buying spree. That strategy was all well and good until it wasn't.

Here's what happened to Sequential's stock price as Wall Street soured on its acquisition strategy and then as revenues were decimated by COVID-19:

Sequential filed for bankruptcy in February of 2021. At this point the company, with a bankruptcy judge overseeing, began to seek offers for its various assets and brands.

Just as the vultures began circling, Jessica and her mom met with an investment bank to put together an offer of their own. An offer that would result in Jessica regaining 100% ownership of her brand, name and license.

Their offer consisted of $65 million in cash, mostly funded by Jessica PERSONALLY.

But here's the best part Jessica had a trump card in the negotiations.

Thanks to that deal point in her original contract, Jessica had the right to approve or deny any sale. That essentially made Jessica's offer the only viable offer that Sequential could even consider.

In August of 2021, Jessica's offer was submitted. Two months later it was officially accepted and consummated.

According to numbers reported by Bloomberg, even as Sequential imploded in 2020 and 2021, the Jessica Simpson Collection still managed to generated $500 million in gross retail sales last year. So it's by no means a dead brand.

I think the really interesting aspect of this story will happen over the coming years. Jessica previously earned just $13 million when her brand generated $1 billion in revenue. As 100% owner she'll get 100% of the profits.

Let's say she builds the brand back up to $1 billion in sales and maintains an industry-standard 20% profit margin. That would be $200 million in profits for Jessica every year. Considering how far she's come so far, I wouldn't bet against it!

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The Inside Story Of How Jessica Simpson Launched, Sold Then Re-Acquired Her Billion Dollar Retail Empire From Bankruptcy - Celebrity Net Worth

05 January 2022

Moroglu Arseven

To print this article, all you need is to be registered or login on Mondaq.com.

Law numbered 7343 on the Amendments to the Enforcement andBankruptcy Law and Certain Laws ("AmendmentLaw") was published in Official Gazette dated 30November 2021 and numbered 31675 and entered into effect on thesame day. With the Amendment Law, fundamental changes on theorganizational structure of execution offices as well as proceduresof postponement of execution, and sale, valuation and tender ofseized properties were introduced within the scope of Enforcementand Bankruptcy Law numbered 2004("EBL").

Some remarkable amendments in the Amendment Law are summarizedbelow:

Please find the full text of the Amendment Law here. (Only available in Turkish)

Information first published in the MA | Gazette, a fortnightly legal updatenewsletter produced by Moroglu Arseven.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Re-structuring from Turkey

Aksu alkan Beygo Attorney Partnership (ASC Law)

In the following article ASC Law addresses the use of standardized "Framework Agreements" prepared by the highly-regarded Banking Association of Turkey in debt restructuring negotiations.

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The Law Amending The Enforcement And Bankruptcy Law And Certain Laws Is Published - Insolvency/Bankruptcy/Re-structuring - Turkey - Mondaq News Alerts

A plaque is displayed at the entrance of the U.S. District Bankruptcy Court for the Southern District of New York in Manhattan, New York, U.S., January 9, 2020. REUTERS/Brendan McDermid

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(Reuters) - Will 2022 finally be the year of the $2,000-an-hour bankruptcy lawyer?

New corporate bankruptcy filings slowed down slightly this year after a pandemic surge in 2020. But there were still enough big 2021 cases to keep leading practitioners busy - with some billing over $1,800 an hour.

Kirkland & Ellis' highest hourly partner rates hit $1,895 in the bankruptcies of offshore driller Seadrill Ltd, mall operator Washington Prime Group and construction startup Katerra Inc.

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Even the most junior associates at the firm billed $625 per hour in those cases, while other Kirkland associates billed as high as $1,195 - more than some partners at the firm, according to fee information filed with bankruptcy courts.

Rates at some other firms weren't far behind. Simpson Thacher & Bartlett partners charged up to $1,850 per hour in the bankruptcy of Chilean bank holding company Corp Group Banking SA. Its most junior associates topped those at Kirkland, charging $655 per hour in the Corp Group case.

The graphics below show hourly rates charged by those and other firms tapped as lead debtor's counsel in a sampling of Chapter 11 cases filed in 2021, as well as the amounts they had charged in those bankruptcies as of mid-December.

Most of the cases were selected because they involved debt of at least $1 billion.

Some were notable for other reasons, such as the case of former talc miner Cyprus Mines Corporation, which was caught up in Johnson & Johnson-related talc litigation before it filed for Chapter 11 protection. (The J&J talc liabilities bankruptcy was not included because it has yet to report monthly fees.)

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Our Standards: The Thomson Reuters Trust Principles.

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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$2000 an hour for a bankruptcy lawyer? 2022 could be the year - Reuters

Jake Paul has some interesting resolutions and goals for the new year after an unbelievable 2021 campaign.

Paul capped off a 3-0 year as a boxer when he knocked former UFC welterweight champion Tyron Woodley completely unconscious in the sixth round of their rematch earlier this month in Tampa, Fla. The rest of the YouTube stars combat sports year included a decision win over Woodley in August, along with a first-round KO of Ben Askren in April.

On Friday, Paul revealed his goals for 2022 which includes absorbing a promotion run by one of the sports all-time greats.

Some people are asking about my 2022 goals, Paul wrote on Twitter. Here they are:

1. Buy Mayweather Promotions and save them from bankruptcy

2. Hire stylist for Floyd Mayweather

3. Take selfie with Oprah

4. Go to chiropractor to heal back from carrying the sport of boxing.

In addition to his victories and bold proclamations, Paul also called for future fights with Nate Diaz, Jorge Masvidal, Kamaru Usman, while certainly getting the attention of UFC president Dana White.

Earlier this week, White offered Paul a drug testing challenge saying the 5-0 boxer can test him for cocaine over the next decade as long as he can steroid test Paul for the next two years.

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Jake Paul: 2022 goals include saving Mayweather Promotions from bankruptcy, heal back from carrying the sp - MMA Fighting

The trustee in the Michael S. Tomaszewski bankruptcy case has asked the court to order Tomaszewski's wife to turn over an anticipated income tax refund once it is received.

Attorneys for Trustee Mark J. Schlant filed the motion last week after Tomaszewski was sentenced to twoto six years in prison for defrauding funeral pre-arrangement customers out of, collectively, more than $500,000.

According to the motion, Michael and Valerie Tomaszewski have jointly claimed refunds of $27,121 for their 2019 and 2020 income tax filings.

The motion asks the court to order Valerie to turn over $13,560 to the court to help settle some of Michael Tomaszewski's debts.

"The Trustee understands that the Debtor recently might have become somewhat limited in his ability to deal with matters such as this and that the necessary arrangements might put Mrs. Tomaszewski in control of the funds," the motion reads. "Therefore the Trustee wishes to secure Mrs. Tomaszewski's cooperation in effecting the turnover."

The bankruptcy judge, Robert H. Jackson,has not yet responded to the motion.

In bankruptcy filings,Tomaszewski lists $1,094,346 in assets against $3,242,390 in liabilities.

At his sentencing on Dec. 22, Judge Charles Zambito ordered Tomaszewski ordered the former funeral home operator to pay$569,434.92 in restitution to his victims, starting at $2,000 a month once he's released from prison.

Tomaszewski admitted to misappropriating funds from clients who paid for pre-arrangement services. There were at least 91 such victims. Many of those victims have filed stipulations with the bankruptcy court protecting those debts from discharge through the bankruptcy process.

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Trustee in Tomaszewski bankruptcy seeks order to obtain tax refunds - The Batavian

While there are time limitations for receiving a second discharge, in bankruptcy there are other ways to protect your home under the bankruptcy code. Lets address the time limitations first. If you received a discharge under Chapter 7, you will not be eligible to file another Chapter 7 case in which you will receive a discharge until 8 years after the first case was filed. To receive a discharge under Chapter 13, you must wait 4 years after filing for Chapter 7 before you file the new case. If you received a discharge under Chapter 13, you must wait 2 years from the date that you filed the first case before filing a new Chapter 13 case in which you will be eligible for a discharge.

Even if the time limitations above prevent you from receiving a discharge, a Chapter 13 personal reorganization can still help save your house from foreclosure. Both your current mortgage payments and any arrearage can be scheduled in a new Chapter 13 plan. The moment your case is filed, you are protected by the automatic stay. This will prevent foreclosure, garnishment, harassment or any other collective action against you while your case is active.

After successful completion of your Chapter 13 personal reorganization, you should be completely current on your mortgage and can continue on with your regular payments. You should keep in mind, however, that the inability to receive a discharge will affect how other debts are treated in your Chapter 13 plan. Most importantly, you will be protected from contact or harassment from these creditors and could possibly eliminate those other debts through your plan.

In the end, it is imperative that you consult with an experienced attorney before you take any action.

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I Recently Received A Bankruptcy Discharge But Have Fallen Behind On My House Payments And Am Facing Foreclosure, Is There Anything I Can Do? -...

Key Takeaways

As software systems evolve, they tend to become less flexible and more difficult to work with. We often attribute this to rampant "technical debt", but fail to talk about what causes it.

Technical debt is not primarily caused by clumsy programming, and hence we cannot hope to fix it by more skilled programming alone. Rather, technical debt is a third-order effect of poor communication. It is a symptom of an underlying lack of appropriate abstractions, which in turn stems from insufficient modelling of the problem domain. This means that adequate communication has not taken place; discussions and decisions to resolve ambiguity and make informed trade-offs have been swept under the rug.

What we observe and label "technical debt" is the by-product of this dysfunctional process: the reification of this lack of resolution in code. To fix the problem of accumulating technical debt, we need to fix this broken process.

The technical debt metaphor was introduced by Ward Cunningham to describe a process where developers make a conscious decision to ship code with known limitations into production. The purpose of shipping early is two-fold: to get quickly to market and to enable a feedback loop from production back to further development and refinement. It quickly caught on, since it allowed developers to communicate "invisible" problems with the technical solutions to management and other stakeholders.

In the process of becoming widespread and popular, however, the meaning of the technical debt metaphor has also become diluted. Any code running in production that has limitations or quality problems may find itself labelled as technical debt. This is unfortunate, since it undermines the usefulness and the richness of the metaphor. Much of what is considered technical debt is incurred inadvertently over time, and with no clear strategy for paying it off.

It is regrettable that the meaning of the technical debt metaphor has been diluted in this way, but in language as in life in general, pragmatics trump intentions. This is where we are: what counts as "technical debt" is largely just the by-product of normal software development. Of course, no-one wants code problems to accumulate in this way, so the question becomes: why do we seem to incur so much inadvertent technical debt? What is it about the way we do software development that leads to this unwanted result?

These questions are important, since if we can go into technical debt, then it follows that we can become technically insolvent and go technically bankrupt. In fact, this is exactly what seems to be happening to many software development efforts. Ward Cunningham notes that "entire engineering organizations can be brought to a stand-still under the debt load of an unconsolidated implementation". That stand-still is technical bankruptcy. It means that your organization can no longer move forward.

Reasonable changes to the software take an unreasonable amount of time to implement. Quality problems become permanent; you can't fix bugs without a very high chance of introducing new ones, leading to a sort of oscillation between problems.

If we are to understand the forces that drive the accumulation of inadvertent technical debt, we must look at the code and see how "technical debt" manifests itself.

My observation is that there tends to be a lot of ifs and buts, and little to communicate intent and aid understanding. By that I mean literally that there are many if and else branches in the code, and a great number of boolean flags to control execution flow between those branches. Whats missing are useful abstractions and boundaries to make sense of it all. This makes it difficult to isolate the code related to a single feature, since the code for that feature isnt isolated in any meaningful or obvious sense. It is difficult to predict the effects of changes, since changing a single boolean flag can have rippling effects throughout the codebase.

Code ends up like this when we have an underdeveloped, inadequate mental model of the problem were trying to solve with software. Softwares dirty secret is that we can implement solutions to problems we cant articulate clearly. If our software is "wrong", the correct behavior is always only an if-branch away. We just need a way to inject the right flag so that we can take the correct turn in the flow of execution instead of the wrong one. We can and do compensate for our poor domain models by using if-branches as epicycles. But this is exactly the cause of our problem with inadvertent technical debt: over time, we paint ourselves into a corner. It leads to incomprehensible software - technical bankruptcy.

We can no longer add functionality this way without breaking existing functionality.

It's very hard to write simple and precise code if we don't have the proper concepts in our heads. We need those concepts not only to structure our solution, but to think clearly about the problem in the first place. As long as we lack the proper concepts, both our thinking and our communication with others will be clumsy and roundabout. Imagine trying to tell someone a story about a dog without knowing the word dog or even the word animal. "It's one of those eager, four-legged living things that wag their tails". It sounds silly, but I've been in that situation many times on projects.

On one project I was on, we struggled with our credit card module. The code was complex and difficult to understand, and we had very inefficient and frustrating discussions whenever we talked about that module, but we couldn't really figure out why. It wasn't until we realized that we lacked a concept to describe how credit cards were associated with credit card deals (an "association mechanism"), that everything fell into place. Suddenly our heads cleared up, our discussions cleared up, and it was possible to implement very straightforwardly. We deleted all the clumsy code we had written up to that point, and replaced it with something that was trivial to understand.

This experience points toward a heuristic for tackling complex code - code that tends to get labelled "technical debt" after a while: look for missing or awkward concepts. Look for patterns of frustration in the design discussions in the team. Its probably the domain trying to tell you something. Trying to "fix" the code without the right concepts is likely to fail, since there is no elegant or clean organization of the wrong concepts.

I want to argue that our problems stem from an underdeveloped, inadequate mental model of the problem we're trying to solve with software. For software that is developed as group efforts, which is most software, that mental model needs to be shared among the people working on the software. Otherwise, it's no wonder that inconsistencies and corner cases come to bite us. If were not aligned on what the problem and the proposed solution is, then we should expect to see the consequences of those failures of alignment manifest themselves in the code. And we do.

The key to developing a sufficiently rich and flexible shared mental model is communication and collaboration. When software is weighed down by technical debt, that's a symptom that the organization developing the software probably needs to look at its communication and collaboration patterns.

Ward Cunningham invented the technical debt metaphor to enable developers to communicate to business people something that is visible to the former, but hidden from the latter; that while we shipped code now that meets the business requirement, we overstretched in doing so. Having done so has left us off-balance, and we need to spend some time regaining our balance. Otherwise we will eventually fall down and it's going to be hard to get up. But in a sense, that's an easy problem to fix: generously give the developers a bit of time every now and then to clean up in their own house, so to speak. All that's required from the business people is a little patience while the developers catch up.

Unfortunately, I dont think its going to work. If I'm right that much of what we label technical debt really stems from inadequate modelling of the business domain and ultimately is caused by communication and collaboration issues, it's not a problem that developers can solve on their own. In fact, thinking that the developers can and should handle technical debt alone is a symptom of the kind of thinking that leads to technical debt. Thats an uncomfortable insight for both developers and business people. It is convenient for business people to think of technical debt as something for IT to handle, and it is more comfortable for developers to think that all they need is a little time to get things right. But its a convenience and a comfort that we cannot afford if were going to address the root causes of technical debt.

The main problem for a software organization that finds itself close to technical bankruptcy is not the amount of debt itself, but rather that the organization in its current state produces unmanageable amounts of complex code inadvertently. There is little to be gained by chipping away at the incurred debt if we continue to produce new debt at the same rate as before. It can be very costly, time-consuming and risky to try to untangle code that is near bankruptcy. It is often better to find some way of replacing debt-heavy code with other code that has been produced in a healthier way. The best advice I can give is to try to incur less debt than we currently do, that is, reduce the amount of technical debt we have to reduce in the first place.

Over time, the best approach to reducing what we label "technical debt" is by addressing the root cause, which is how we work together. It can be difficult to change the culture of a software organization. Top-down initiatives will often struggle, since they fail to address the problems seen on the ground. Perhaps the best top-down initiative is to give leeway and autonomy to those on the bottom, since I believe it is possible to bring about positive change bottom-up.

My experience has been that doing software development as a group (i.e. ensemble programming) not only produces better designed solutions to problems quicker, but also creates a cultural shift towards more open, empathic and candid communication. This in turn means that teams doing ensemble programming are less likely to find themselves bogged-down in technical debt as time moves on. Moreover, having experienced improved communication within the team, ensembles are less likely to settle for poor communication across team boundaries as well, or between people with different roles in the organization. If this is true, then working in ensembles can have a positive rippling effect on the communication patterns of the organization.

The uncontrolled accumulation of inadvertently incurred technical debt is endemic in the software industry. The underlying cause for this tendency is that our communication patterns are inadequate. This leads to underdeveloped mental models, and developers approximating solutions to poorly articulated and understood problems by heaping on boolean flags and branching control flows.

Over time, software built this way becomes incomprehensible. The way to break this tendency is to change the way we build software: by collaborating and communicating better. Working in ensembles can be a step in the right direction, since it places collaboration and communication at the core of software development.

Einar W. Hst is a software developer at NRK, the Norwegian public broadcaster, where he helps build the TV streaming service. His main interests are domain modelling, API design and computer programming. He has a PhD in Computer Science from the University of Oslo. You can find him on Twitter as @einarwh or read his blog.

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Avoiding Technical Bankruptcy: a Whole-Organization Perspective on Technical Debt - InfoQ.com

Sean Combs arrives at the Met Gala in New York, May 7, 2018. REUTERS/Eduardo Munoz

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(Reuters) - Sean Diddy Combs has secured court approval to buy back his fashion brand Sean John from its bankrupt owner, GBG USA Inc.

U.S. Bankruptcy Judge Michael Wiles in Manhattan signed off on the sale during a brief hearing on Wednesday. There were no objections to the sale.

Combs' company SLC Fashion LLC made the highest bid for the brand at an auction on Monday, bumping its final offer to $7.55 million from its initial $3.3 million bid. Four other bids were submitted prior to the auction, GBG attorney Erin Ryan said during the hearing.

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The sale is expected to close by the end of the year.

GBG filed for bankruptcy in July with around $238 million in long-term debt, blaming its financial strain on the combination of a decline in brick-and-mortar shopping, the economic impact of the COVID-19 pandemic and substantial royalty obligations. Most of its revenue was made by distributing its products to department stores and other retailers including Macy's, Costco, TJMaxx and Nordstrom.

Combs launched Sean John in 1998.

The case is In re GBG USA Inc, U.S. Bankruptcy Court, Southern District of New York, No. 21-11369.

For GBG: Rachel Strickland, Andrew Mordkoff, Ciara Sisco and Erin Ryan of Willkie Farr & Gallagher

For SLC Fashion: Alec Ostrow of Becker, Glynn, Muffly, Chassin & Hosinski

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Our Standards: The Thomson Reuters Trust Principles.

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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Sean 'Diddy' Combs approved to buy fashion line out of bankruptcy - Reuters

FORT WAYNE, Ind. (WANE) A hearing related to the Red River Waste Solutions bankruptcy filing was postponed. It was originally scheduled to be December 20, but court documents now show it scheduled for the morning of December 23.

Red River filed for Chapter 11 bankruptcy in October, in part, citing the pandemic for causing increases in missed collections because it wasnt able to hire more employees to keep up with increased trash from more people staying home.

Last week an attorney for the city of Fort Wayne told the Solid Waste Advisory Board that in court documents, Red River said Fort Wayne is a losing contract and that Red River is losing more money than they are making.

As part of its bankruptcy reorganization, Red River can choose to keep or reject its contract with Fort Wayne. The rescheduled hearing was requested by Argonaut Insurance Company, which is the surety company for Red Rivers contract with Fort Wayne. A surety company provides a bond to guarantee that, in this case, Red River would perform as required in its contract with Fort Wayne.

This is an emergency motion from this third party, the third party is the surety, Corporate Attorney Apexa Patel, said. So, theyre saying they want the court to shorten the time that Red River would have to either assume the contract or reject the contract. And the reason is the longer Red River takes [to decide], the longer time that fines can be assessed and they, theoretically the surety, would be on the hook for it. So, its the surety company that requested the emergency hearing.

In other court documents filed in federal bankruptcy court in Texas on Monday, Red River named Stretto, Inc. as its claims and noticing agent. According to its website, Stretto is a company that specializes in managing corporate restructuring and bankruptcies.

Watch for more from Patel about Red Rivers contract with Fort Wayne and whats next in the legal process throughout this week on WANE 15.

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Red River bankruptcy hearing delayed in Texas court - WANE

Hello Livings Eli Karp and 1580 Nostrand Avenue (Hello Nostrand)

Eli Karps Hello Living is making a do-or-die attempt to save its prized East Flatbush rental project.

Hello Living Developer Nostrand LLC, the corporate entity of the 1580 Nostrand Avenue project, made the filing in federal court in Rockland County on Tuesday, one day before lender Madison Realty Capital was set to hold a UCC foreclosure auction on the equity interests in the development.

In a strange twist, just hours before Hello Nostrand filed for Chapter 11, Brooklyn investor Abraham Leifer of Aview Equities, claimed to have a contract to buy the project for $83 million, including a $1 million down payment, according to a court filing. Leifers attorneys were seeking to stop the auction.

Neither Leifers attorney nor Leo Fox, Hello Livings bankruptcy attorney, responded to requests for comment.

By filing for bankruptcy, Hello Living has, at least temporarily, halted the auction and remains in control of the property. The Brooklyn-based firm can now seek out rescue financing. It is unclear what will happen with Leifers alleged contract for the property.

Karp said in an affidavit that Madison is alleging claims of over $69 million. He said he will attempt to settle with the lender, his one-time adversary.

A Brooklyn native, Karp sought to construct luxury rentals in an area that had yet to be gentrified, south of Prospect Lefferts Gardens near Little Caribbean. He bought the site for $13 million in 2014. Of the 210 units planned at Nostrand Avenue, 95 are completed, a marketing brochure for the property shows.

Karp alleges he was wiped out of business by Madison. After buying a number of loans, the lender manufactured defaults, on his loans for 1580 Nostrand Avenue in order to charge millions of dollars in default interest at a rate of 24 percent, Karp claims.

He alleges that Madison Realty forced the loan into a forbearance plan that required him to take out a $8.3 million mezzanine loan, of which $4.5 million went to pay default interest. Madison then filed the UCC notice.

Madison has strongly denied the allegations.

The lenders lawyers argued that Karp voluntarily agreed to take on the mezzanine debt and the terms of the loan. When he did not meet those terms, Madison took action.

In late October, a New York Supreme Court judge in Rockland County ruled in favor of Madison, allowing the lender to go forward with the sale of the equity interests and most likely take control of the property.

A month later, a judge in Brooklyn also sided with the lender, granting Madisons motion to dismiss Karps fraud allegations. Karp is appealing that decision.

Greg Corbin, a bankruptcy and foreclosure specialist at Rosewood Realty, has been spearheading the UCC sale.

Faced with foreclosure, developers often will put their projects corporate entity into bankruptcy, which gives them additional time to restructure and secure financing to pay off lenders.

Madison Realty Capital, led by Josh Zegen, Brian Shatz and Adam Tantleff, is among the more active lenders in New York Citys commercial real estate market.

UCC foreclosures are ticking up across New York. Traditional foreclosures are still banned under a statewide moratorium, but in a UCC proceeding, the lender takes control of indirect equity interests in a property, not the property itself. That remains legal.

Contact Keith Larsen

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Hello Living staves off foreclosure on East Flatbush project, for now - The Real Deal