events including the death of the president and principal stockholder of the debtor corporation during the course of the hearings and the illness of the attorney for the debtor involving a serious operation requiring many weeks of hospitalization. Untoward events, rather than inattention on the part of the parties, therefore, appears to be the basis of the long delay. A study of the report of the Special Master sur plan of reorganization, however, has convinced the Court that prompt action is required to bring this proceeding to an early conclusion and with that in mind the Court makes the following observations.
The Special Master's conclusion that Plan B, the only plan seriously advanced by the Trustee, is fair, equitable and feasible was based on the premise that the debtor had available to it new financing in the sum of $ 550,000. It is clear from a review of the record and the monthly reports of operations submitted to the Court that if financial assistance in that amount is not available, all questions presently posed to the Court are purely academic. If no plan is consummated and an adjudication is entered, jurisdiction in the action will vest in the Referee. The Receiver and Trustee appointed by this Court, William D. Teefy, has successfully operated the business of the debtor and has shown excellent business judgment in so doing. The quick assets of the corporation, as the Court reads the original balance sheet, were slightly in excess of $ 75,000 at the time of Mr. Teefy's appointment. The latest report as of February 29, 1956 shows quick assets of approximately $ 245,000. In his operation as Receiver, and later Trustee, from January 25, 1954, the date of his first appointment, to February 29, 1956, the business had total sales in excess of $ 2,250,000. The accounting report shows that from these sales a gross profit of $ 570,000 was realized with a net operating profit of $ 136,000, not taking into account, however, allowable depreciation which can be taken for income tax purposes of some $ 70,000. This operation was conducted with 'scrap' as contrasted with 'virgin plastics' (a much more profitable operation), since the Court would not permit its Trustee to utilize the credit necessary to manufacture materials from virgin plastics; this despite the fact that such credit was offered the Trustee, both on the basis of his successful operation of the business and his reputation as a business man. The Court considered the risk involved too great. It appears to the Court that in the present posture of this complicated case and in the exercise of its equitable powers, it should order the debtor to immediately secure to the Trustee financing which its president said under oath it had and could provide for the consummation of Plan B. The Court could not, under present circumstances, approve Plan B as fair, equitable and feasible, unless the necessary financing is available. The Court, therefore, will enter an order requiring the debtor to deposit in escrow, under conditions to be approved by the Court at the time of deposit, the stated sum of $ 550,000 not later than May 15, 1956. Unless such a deposit is made there is no likelihood that the debtor corporation can be reorganized. If the deposit is not made within the specified time the Court will enter such further order as may be necessary.
The determination of the Court to require the debtor to now produce evidence of financial resources is not to be considered as a final determination by the Court that the Plan is fair, equitable and feasible. It is the opinion of the Court, in the present status of the case, that while such deposit probably will make possible the development of Plan B to the point where the Court can determine that it is fair, equitable and feasible, there are certain other elements which must be further explored before ultimate decision is made. The deposit of the money will protect the lien creditors and should, in view of the fact that the debtor has a going business with every prospect of profitable operation in the future, bring about a situation which would ultimately result in the approval of Plan B. The present action which is taken by the Court on its own motion and responsibility will, in the opinion of the Court, tend to facilitate final disposition of the proceeding.
The order to be entered by the Court will be without prejudice to the right of any party in interest to move to vacate, alter or amend said order.
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