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Liquidation not needed, developer HDG Mansur tells court

September 15, 2014

Two affiliates of troubled Indianapolis-based developer HDG Mansur oppose requests to appoint a Chapter 11 trustee or convert the case to a liquidation in Chapter 7, saying significant progress has been made toward a plan and global settlement of claims.

HDGM Advisory Services LLC and HDG Mansur Investment Services Inc., which managed Shariah-compliant investment funds, filed court papers opposing he requests Sept. 11.

The requests were made by KFH Capital Investment Co. and Kuwait Finance House Real Estate Co., which sued Mansur Investment and owner Harold Garrison in the United Kingdom for breach of contract, fraud and negligent misrepresentation, according to court papers.

The KFH entities aren’t eligible to seek such “drastic measures” because they’re not creditors of, nor do they have claims against, both debtors, according to the fund managers. They are motivated by “some other unstated purpose,” not their Chapter 11 rights or distributions in the case, the fund managers said in the court filings.

The managers said the KFH entities haven’t proven, among other things, that the company’s bankruptcy representative is unqualified to oversee the case and investigate claims against Garrison. There also are no operations to “mismanage” because the fund managers are no longer operating, according to court papers.

The fund managers said they will file for creditor consideration a plan that proposes an accumulation of assets from various sources, including Garrison and insurers, for distribution to creditors.

A proposed settlement with Garrison is a key component of the plan, the fund managers said, but it hasn’t been made final because of the KFH entities’ requests and their “professed cry” to be part of such negotiations. The KFH entities, however, haven’t accepted the fund managers’ invitation to act as third-party reviewers of settlement discussions and agreements reached with Garrison, according to the fund managers.

The fund managers said permitting the bankruptcy to go forward and avoiding the “race to the courthouse door” will give them an opportunity to reach a global resolution that will result in a sharing of recoveries by all creditors.

A hearing to consider the appointment of a Chapter 11 trustee and the conversion request is scheduled for Tuesday, according to court papers.

The fund managers filed petitions for Chapter 11 protection in Indianapolis on May 21 to fend off a judgment from a lawsuit filed in New York federal district court in January 2013 by funds previously managed by the bankrupt companies.

The two Mansur affiliates seeking Chapter 11 protection managed and provided advisory services to a pair of Cayman Islands-based equity funds that comply with Muslim Sharia law, according to court documents. Shariah-compliant funds must follow rules that include investing only in Shariah-compliant companies, appointing a Shariah board and donating interest earned to charity.

The Sharia funds, GPIF Equity Co. Ltd. and GPIF Finance Co. Ltd., sued the HDG Mansur affiliates in federal court in January 2013, accusing them of misappropriating $5.8 million in assets. The judge awarded GPIF the damages in August, rejecting HDG Mansur’s argument that it charged the additional fees to rectify a billing error.

The judge has yet to grant final judgment on a counterclaim brought by HDG Mansur against GPIF, claiming the funds owe the local firm more than $20 million in fees. A trial has been set for Oct. 6.
 

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