IMH Financial Corporation (“IMH” or the “Company”) has recently filed for chapter 11 bankruptcy protection before the United States Bankruptcy Court for the District of Delaware.

IMH is a real estate investment holding company with assets consisting of: (i) the MacArthur Place Hotel & Spa in Sonoma California, (ii) thousands of undeveloped acreage and related water rights outside of Albuquerque New Mexico, (iii) other real estate assets, and (iv) significant tax attributes.

According to the First Day Declaration of Chadwick S. Parson, the Chief Executive Officer of IMH Financial Corporation, IMH has no material secured debt, and no funded unsecured indebtedness. It does not hold significant levels of debt, apart from a small loan and amounts owing to creditors.

JP Morgan is the holder of all of the shares of the Company’s Series A Senior Preferred Stock and has offered a lending facility of $10.15 million. IMH Financial Corporation will draw down $1.9 million from the facility, if approved by the Delaware Bankruptcy Court. Additionally, there is also an exit facility lending agreement up to $71 million to fund the Company’s obligations as part of the restructuring.

Under IMH’s proposed plan, shareholders owning Series B-1 Preferred Stock are projected to receive $8.9 million pro rata. The remaining common stock shareholders, apart from JP Morgan, are estimated to receive between $5 million and $7.5 million. Common stock shareholders are not allowed to sell their shares.

The Company already held a $37 million loan pertaining to a hotel property, The L’Auberge de Sonoma Resort Fund, LLC, which will continue to run in the background of all other restructuring activities. The Company’s remaining portfolio is comprised of over $2 billion of assets, many of them in the hotel industry.

IMH has taken on certain upscale real estate and restaurant projects in recent years. This is one of the sectors most badly affected by the 2020 health crisis.  By filing chapter 11 bankruptcy and obtaining first day relief, IMH intends to salvage its business and reorganize its capital structure.

The bankruptcy case is before the Honorable Christopher S. Sontchi.  The Section 341 meeting of creditors is scheduled for August 18, 2020 at 1:00 p.m.

Carl D. Neff is a partner with the law firm of Pierson Ferdinand LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at carl.neff@pierferd.com.