Madison 92nd Street U.S. Trustee: Chapter 11 trustee needed for case

By Caroline Salls

Pittsburgh, Feb. 10 - The U.S. Trustee for Madison 92nd Street Associates, LLC's bankruptcy case has asked the U.S. Bankruptcy Court for the Southern District of New York to appoint a Chapter 11 trustee to oversee the company's case, according to a Friday court filing.

If the court decides not to appoint a trustee, Region 2 U.S. Trustee Tracy Hope Davis said the case should be converted to Chapter 7 or dismissed.

"The Bankruptcy Code provides that a Chapter 11 trustee shall be appointed when a party establishes fraud, dishonesty, incompetence or gross mismanagement of the affairs of a debtor by current management or when the appointment is in the best interest of creditors," Davis said in the motion.

"In this case, grounds exist for the appointment of a Chapter 11 trustee under either standard."

Davis said the examiner appointed in Madison 92nd's case found that the fundamental issue in the case is the inability by two separate groups of equityholders to agree on a single course of action.

Specifically, Davis said the equityholders cannot agree whether to sell the company's hotel asset or to restructure the mortgage on the hotel.

As previously reported, the examiner recommended that the court appoint a Chapter 11 trustee if the equityholders could not agree on a course of action.

"At this juncture, since the equityholders have not agreed to a compromise, it is in the interest of creditors that a Chapter 11 trustee be appointed," the U.S. Trustee said in the motion.

A hearing is scheduled for March 6.

Madison 92nd Street is a New York-based hotel owner. The company filed for bankruptcy on Aug. 16, and the Chapter 11 case number is 11-13917.

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