A fractious relationship between Hildene Capital Management and Acme Holding Co. was evident in the April 2-3 courtroom interaction between Rex Terry of Fort Smith, Hildene’s local counsel, and Lex and Alex Golden of Little Rock.
Hildene represents about $3.4 million of Acme debt tied to trust-preferred securities issued on March 26, 2003. A bankruptcy reorganization plan advocated by the father and son proposes that Hildene essentially eat the debt.
Hildene considers the plan unrealistic and inequitable, based on unequal sacrifice among creditors and no sacrifice by the Goldens, who control Acme and its $111 million-asset Allied Bank.
The contentious interplay continued in an April 14 filing by Hildene that implied that what’s good for the Goldens isn’t necessarily good for Acme and its creditors.
Hildene objected to what it called an excessive $33,787 payment request to the court for legal services by Acme’s bankruptcy attorney, Stanley Bond of Fayetteville.
Hildene also alleged that Bond wasn’t acting in the best interests of Acme by opposing the auction of the company’s most valuable asset: 4,000 shares of Allied Bank stock.
Hildene claimed that such an auction would provide it and other creditors with “at least the possibility of a recovery” as opposed to a “total financial loss” under Acme’s proposed plan of reorganization championed by the Goldens.
Hildene would agree to what it portrayed as reasonable compensation of $25,000 if Bond helped facilitate an auction.
“I have not found another instance where a bank has gone this route to circumvent getting foreclosed on,” said Michael Nichol, partner with Hildene Capital Management in Stanford, Connecticut, in a post-hearing interview.
“This bank should be sold, and it should be sold in a fair way, and we’ll see what we get.”
A tidbit that came to light during the April 2-3 Acme Holding bankruptcy hearing was the actual loss that Allied Bank suffered from serial fraudster Kevin Lewis: $1.5 million.
The loss originated from a $3.25 million loan to Lewis secured by bogus special improvement bonds.
Passing reference was made to Lex Golden asking an unnamed loan officer to verify the Lewis collateral.
The check, which should have revealed fraudulent problems with the special improvement bonds, didn’t happen. Golden apparently didn’t follow up on the matter.
Lewis pleaded guilty in 2011 to defrauding Allied Bank and a string of other Arkansas lenders who failed to authenticate his collateral.
Testimony at the hearing revealed that Acme spent $64,000 of its remaining $120,000 to keep a life insurance policy on Lex Golden in force.
Alex Golden was asked where Acme would come up with the money to pay next year’s premium on the $5 million policy given the company’s dwindling cash.
“I’m not sure,” he said. “We’d probably request a dividend.”
The third quarter of 2010 was the last time Allied paid a dividend to Acme.
Allied is prohibited from declaring dividends under the terms of an ongoing cease-and-desist order by the Arkansas State Bank Department and a supervisory agreement with the St. Louis Federal Reserve.
The life insurance policy was purchased with the intent of covering Acme debt, according to Alex Golden.
For even more about Acme, see George Waldon’s Banking column this week.