Privately owned Burroughs & Chapin Co. Inc. wants to block the public sale of its stock as part of a bankruptcy settlement involving a former board member, but a new lawsuit filed Monday against a current board member could put even more of the developer’s shares up for public bidding.
The company is studying whether it has any legal right to file an objection to a proposed settlement agreement between Conway National Bank and former B&C board member Larry Biddle that would put 6,300 shares of B&C stock up for public sale.
The proposed agreement is part of a Chapter 11 bankruptcy reorganization filed by Biddle and his wife, Virginia. The stock sale would represent the first time such a large block of B&C shares would be available to the public. The stock is almost exclusively owned by ancestors and family members of B&C’s founders.
B&C has asked a bankruptcy judge to extend the deadline for an objection to Feb. 21 so the company’s lawyers can study what, if any, options the company has to block the sale.
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Meanwhile, casino boat owner Alvin Shuman has filed a lawsuit against Biddle and his son – current B&C board member and Conway lawyer Marshall Biddle – alleging that the younger Biddle pledged 1,721 shares of B&C stock as collateral for a 2011 loan.
Shuman – whose casino boat operates out of Savannah, Ga. – alleges that Marshall Biddle failed to repay the $98,450 loan and has not responded to requests for payment. Myrtle Beach lawyer Robert Hedesh, who represents Shuman, said a judge ultimately could sell the B&C stock to the highest bidder to settle the debt.
Marshall Biddle could not be reached for comment Monday.
Larry Biddle was named as a defendant in Shuman’s lawsuit because he was the trustee in the security agreement involving his son and was supposed to release the collateral upon Shuman’s demand, according to court documents. Shuman claims in his lawsuit that Marshall Biddle “waived all legal and equitable defenses to [Shuman] taking immediate and exclusive control of the collateral” if payment is not made.
“I don’t know what the stock is worth . . . he [Shuman] would rather have the money,” Hedesh said.
In the bankruptcy case, B&C lawyer Brian Church of Charlotte, N.C., said the company has “communicated with Conway National Bank about some concerns relating to the proposed disposition of B&C stock” pledged to the bank. Church said in court documents that B&C, the bank and the debtors “have engaged in communications directed at resolving those concerns.”
Church did not say in court documents what that resolution might entail. B&C spokeswoman Lei Gainer said the company does not comment on pending legal matters.
B&C President Jim Apple described the company as having a “family oriented shareholder base” with about 250 shareholders, according to a letter he wrote in July to the U.S. Securities and Exchange Commission proposing changes to the federal JOBS Act.
It is not clear how much money B&C stock could fetch on the open market. Conway National Bank set the stock’s value at $92.89 per share, which is the 2011 book value of the stock. Other court filings in the bankruptcy case estimate the stock’s value at $250 per share.
Larry Biddle – whose wife is a part of the Burroughs family – said the stock is worth much more than the 2011 book value because that value was set at a time when B&C had stopped paying dividends on the stock. The company has since resumed paying dividends to shareholders, although Biddle said he does not know the current book value of the stock.
Larry Biddle has said he is hopeful an alternative solution can be reached before the proposed April 15 sale date of the 6,300 shares, allowing him and his wife to cure the loan default without having to surrender the stock.
“We may not get to that point,” he said. “We’re working on two or three different things now.”
Larry and Virginia Biddle have filed for Chapter 11 bankruptcy protection, which is a type of bankruptcy that allows debtors time to work with creditors on reorganizing personal or company debts. The settlement agreement for the stock sale was signed by lawyers representing both the couple and Conway National Bank.
The proposed settlement agreement stems from a $950,000 loan Larry and Virginia Biddle received from Conway National Bank in 2001, according to court documents. That note was renewed in February 2010 for $900,000 and is secured in part by three B&C stock certificates totaling 6,300 shares.