Tuesday, December 22, 1998

Liberty House

Debt buyer busy in
Liberty House case

The company has
acquired 56 claims

By Peter Wagner


Business is picking up for Aurel Capitol, LLC, the New York investment firm that so far has acquired 56 claims from vendors owed money in the Liberty House bankruptcy.

Aurel, which speculates on bankruptcy claims, bought the Liberty House claims -- totaling $109,630 -- at an undisclosed discount. A Manoa woman said she turned down an offer of $40 for her $806 claim -- about 5 cents on the dollar.

Aurel officers note that claims trading is common in mainland bankruptcies, including the current Chapter 11 bankruptcy of department store chain Montgomery Ward. Buyers hope to collect their claims at a higher rate at the end of a bankruptcy, while sellers settle for less.

While Hawaiian Airlines, which emerged successfully from bankruptcy in 1994, repaid its creditors in full with shares of its stock, reorganizations often results in repayment below face value of claims.

Aurel filed its first batch of 14 claim transfers, totaling $39,397, in U.S. Bankruptcy Court on Dec. 7.

The company on Dec. 10 added 42 transfers totaling $70,233.

Most of the Liberty House vendors choosing to sell their claims -- ranging from several hundred to several thousand dollars -- are mainland companies.

More than 5,000 claims have been filed against Liberty House in its Chapter 11 bankruptcy, claims that are on hold until the retailer emerges from its reorganization with a court-approved plan to repay its debts. Attorneys involved in the case say it should be completed by June, more than a year after Liberty House filed for bankruptcy protection last March.

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