Unbuilt Texas Cancer Center Creditors File Ch. 11 Plan
By Jess Davis
Law360, Dallas (July 5, 2016, 4:37 PM EDT) — Creditors of a planned Dallas cancer treatment facility on Friday proposed a liquidation plan that would allow billionaire energy tycoon Kelcy Warren, an investor, to recoup $13.25 million.
Under a Chapter 11 plan for debtors Dallas Proton Treatment Holdings LLC and Dallas Proton Treatment Center LLC proposed by the official committee of unsecured creditors, Warren’s Dallas Proton LLC would have an allowed claim of $13.25 million. Any unsecured claims held by Warren — who invested $20 million in the Dallas facility — would be released and discharged, and Warren’s adversary proceeding would be dismissed, according to the proposed plan.
Creditor Lulu Ltd. would be allowed to claim $29.1 million but would be treated as an unsecured creditor, according to the proposal. Last in line among the eight classes of claims proposed under the plan would be holders of equity interests in the debtors, who would receive no distributions under the plan and whose equity interests would be effectively wiped out.
Under the plan, the proton center’s assets would be put into a liquidating trust. Dallas Proton will recover its $13.25 million claim off the top, with the remaining assets split pro rata among the creditors.
Jason Kathman of Pronske & Kathman, P.C., who represents the unsecured creditors, said the plan is part of a global settlement among the committee, Dallas Proton, Lulu and creditor Zeitgeist Capital LLC, which has a claim for about $8 million. Because the settlement parties make up about 95 percent of the creditors, Kathman said he expects the plan will be approved.
“We’re fairly confident it’s going to be confirmed,” Kathman said.
Counsel for the remaining parties did not immediately respond to requests for comment Tuesday.
The Dallas center is an affiliate of Advanced Particle Therapy LLC, which through affiliates is also developing proton therapy cancer treatment centers in San Diego, Atlanta and Baltimore, all plagued with financial problems. Investors in the Dallas center accused its officers of entering a commercially unreasonable loan to APT, providing the parent company with enough cash to finish its other developments.
The debtors would preserve their right to sue APT and other APT entities for fraudulent transfer and other alleged wrongdoing and would retain the right to make claims against Deutsche Bank AG, Williams Financial Group, Paul Hastings LLP, Beirne Maynard & Parsons LLP and Gardere Wynne Sewell LLP.
According to a disclosure statement filed with the plan, Paul Hastings represented the Dallas center along with APT and the Maryland and Georgia subsidiaries, advising both the lender and borrower on loans from the Dallas center’s investment pool to APT. The unsecured creditors committee said it believes that simultaneous representation was a conflict of interest and that there may be malpractice claims against the firm.
Dallas Proton Treatment voluntarily filed for Chapter 11 protection in September after being hit with foreclosure proceedings from Warren, the chairman and CEO of Energy Transfer Equity LP and one of its biggest backers.
Warren requested the appointment of a trustee in September, about a week after the Dallas entities filed voluntary Chapter 11 proceedings. He alleged money invested in the Dallas center was diverted to APT’s Atlanta and Baltimore projects and accused the Dallas entities of purposefully failing to prosecute the bankruptcy estate’s claims against insiders.
In court filings, Warren has referred to the Dallas project as an effective and literal “hole in the ground,” saying in his request to appoint a trustee that the debtors “never had any realistic ability to reorganize” because “no reasonable investor is going to invest money into the debtors given the fraud perpetrated on Warren.”
The debtors officially took no position regarding the trustee appointment, but dispute all allegations made in Warren’s motion, according to court records.
APT’s Georgia affiliate faced an involuntary Chapter 11 petition in March but told a Delaware court in April that it had neared a financing deal to complete the $200 million project.
Warren and Dallas Proton are represented by Kevin Lippman and Davor Rukavina of Munsch Hardt Kopf & Harr PC.
The official committee of unsecured creditors is represented by Gerrit Pronske and Jason Kathman of Pronske & Kathman PC.
Lulu Ltd. is represented by Marty Sosland of Butler Snow LLP.
Zeitgeist Capital is represented by Michael J. Collins of Brewer Attorneys & Counselors.
The debtors are represented by Marcus Helt and Mark Moore of Gardere Wynne Sewell LLP.
The case is In re: Dallas Proton Treatment Center LLC, et al., case number 3:15-bk-33783, in the U.S. Bankruptcy Court for the Northern District of Texas.