Liberty House
hearing rescheduled
for June 28

Complicating the reorganization
plan situation is a $138 million
tax bill levied by the IRS

By Peter Wagner
Star-Bulletin

A hearing scheduled for next week in U.S. Bankruptcy Court on opposing reorganization plans for Liberty House has been moved to June 28.

The plans were recently filed by a lending group headed by Bank of America -- major creditors in the Chapter 11 case -- and Liberty House owner JMB Realty Corp. of Chicago.

Under a recently revised plan filed by the lending group, unsecured creditors would receive 90 cents on the dollar for their claims against the company. The plan also would give the lenders 99.5 percent ownership.

JMB's proposed reorganization plan would give most creditors 95 cents on the dollar and would give the lending group a 70 percent stake in the company.

The lenders claim they are owed about $173 million, the major share of Liberty House's roughly $250 million total liability.

Complicating matters was a $138 million tax bill recently levied against Liberty House by the Internal Revenue Service, despite the company's statement that it incurred just $1.5 million of the bill as a member of a group of companies consolidated for tax purposes by JMB.

The IRS claim could draw out the bankruptcy, now in its 14th month, and raise costs billed to the struggling company.

While Liberty House could file a third reorganization proposal, close observers consider it unlikely because the company currently answers to separate boards of directors appointed by JMB and the BofA group, authors of the existing proposals.