Luminent denied final OK of $3.2 million DIP loan following committee objections

By Caroline Salls

Pittsburgh, Sept. 30 - A federal judge has denied Luminent Mortgage Capital, Inc.'s request for final approval of its $3.2 million of debtor-in-possession financing from Arco Capital Corp., Ltd., according to a Monday filing with the U.S. Bankruptcy Court for the District of Maryland.

According to judge Duncan W. Keir's ruling, Luminent's official committee of unsecured creditors objected to the DIP financing motion, arguing that Arco Capital should not be granted a lien on avoidance actions, a super priority administrative claim and an assertion that the financing contained a mechanism for a "creeping roll-up."

However, Keir said Arco indicated it would not provide the DIP financing without the provisions that drew the committee's objection.

Ultimately, Keir agreed with the committee's arguments.

"This court holds that absent perhaps some most extraordinary circumstance (if at all) not presented in this case, the court should not approve the four broad waivers," Keir said in his ruling.

Since Keir said he could not rewrite the loan agreement or force Arco to provide the DIP financing, the final DIP loan approval was denied.

Luminent, a San Francisco-based real estate investment trust that invests in mortgage-backed securities and loans, filed for bankruptcy on Sept. 5. Its Chapter 11 case number is 08-21389.

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