OMAHA, Neb. -- The $383 million Centris Federal Credit Union said it is optimistic that Kendall Hospitality LLC, a commercial development firm that filed for Chapter 11 bankruptcy on April 8, will be able to put together a reorganization plan that will be satisfactory to the financial institution, which is the firm's creditor.
Kendall Hospitality operated a water park and was preparing to work on several hotel renovations scheduled to take place in the fall of 2007. Centris FCU secured a commercial loan for Kendall in December 2005. According to Jackie Armstrong, an administrator with the United States Bankruptcy Court for the District of Nebraska, Kendall had until April 23 to submit additional documents, but it is likely that an extension would be granted.
"We're working with the member, counsel and the bankruptcy court as they file the reorganization plan," said Kevin Parks, president/CEO of Centris FCU. "Hopefully, a plan can be put together that will take care of this issue."
Howard Duncan, the attorney representing Kendall Hospitality, said the debtor told him that they will be able to refinance.
"It's a pretty straightforward case," Duncan said. "The credit union decided to take legal action to own the property before foreclosure."
Parks said this type of case is nothing unusual.
"When you're in any kind of commercial lending and the owner is having some problems, one option is to pursue reorganization through bankruptcy," Parks said. "It's happening a lot, especially during these current economic times."
Parks said Centris' commercial loan portfolio is "pretty strong with good borrowers." He acknowledged that the credit union was impacted by a poor-performing participation loan in Florida, but Centris had set up enough reserves to circumvent losses. The credit union suffered a $6 million loss on 80 homes in two locations in Florida, Parks said. According to Centris' Dec. 31, 2007, 5300 Call Report, the credit union had nearly $10 million in regular reserves. For the same period, Centris had $9.7 million in participation loan charge-offs. All loan charge-offs due to bankruptcy were $431,282.
NCUA said it became aware of the loan problem in December 2006, conducted a review, followed up in October 2007 and is scheduled to examine Centris again in June.
"Centris FCU is working with the borrower's attorney through the bankruptcy process in an effort to protect their position," NCUA said. "The credit union is well-capitalized and under normal supervision."
Parks said, "you want to have a diverse asset base in your portfolio with all types of lending. We're pretty fortunate that we've been able to do this."
--msamaad@cutimes.com
