A California property portfolio, including a Laguna Beach hotel, risks liquidation after a bitter legal dispute over management control. Valued at $360 million, the assets were expected to cover associated debts. A court-supervised sale process collapsed amid the feud between entrepreneur Mohammad Honarkar and a group of investors led by Mahender Makhijani. U.S. Bankruptcy Court Judge Brendan Shannon expressed concern about value loss and indicated plans to dismiss the case, which could lead to chaotic proceedings and lower property values. Lenders claim they are caught between the conflicting parties.
The dispute shows the limits of using a Chapter 11 bankruptcy case to restructure hundreds of millions of dollars in debt when key participants are locked in a contentious battle.
Each is holding a gun to their own head and saying, Do this, or I'll shoot', US Bankruptcy Court Judge Brendan Shannon said during a court hearing.
Judge Shannon stated he is likely to dismiss the case, which would set off a series of chaotic court battles that could drag down the value of the properties.
Lenders argue they are caught in the middle, held hostage for four months by the warring parties, the Banc of California said in court papers.
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