7:55 p.m. update: Sorry for the delay. Here's my article on the Diablo Grande hearing for Saturday's paper.
Just got back from the teleconference in Modesto. Don't have much time, as I need to get a full story written for Saturday's paper, but here's a quick rundown from today's nearly two-hour hearing:
Diablo Grande has a buyer, World International LLC — a resort developer with projects in places like Cancun and Mexico City — that is willing to pay $20 million plus the $1.5 million cure amount to assume contracts with the Western Hills Water District and others. They still need a few days to finalize an asset purchase agreement and a couple of weeks for World International to complete an engineering study of the project, but both sides expressed confidence that all matters could be worked out.
Because the sale price is below the $26 million the proposed settlement was contingent upon, more money is needed. Some of that money is going to come from "insiders" — companies like Oak Flat Golf and Isom Ranch Winery and Vineyards that have helped to fund and operate Diablo Grande and who owe Diablo Grande a total of more than $11 million. The claims against these insiders are being released in the settlement, a fact judge Robert S. Bardwil (not Baldwil, as I called him in a previous post) expressed great concern over.
Representatives from every side of this thing — including lawyers for Diablo Grande, developer Donald Panoz (representing the "insiders"), the Bank of Scotland, the committee of unsecured creditors and the proposed buyer — laid out their reasons for accepting the settlement and the releases given to these insiders and urged Bardwil to consider the possible damage that could be caused if the sale and settlement are not approved.
Bardwil granted a continuance of both the sale and settlement motions to Sept. 9 at 10 a.m., again at the U.S. Bankruptcy Court in Sacramento. And it sounded as though the pleadings from all sides might have convinced him that both can likely be approved.
That doesn't mean the sale will close, but it's something.
Diablo Grande is very close to running out of money, by the way. It will receive an additional $200,000 from the Bank of Scotland once an asset purchase agreement is signed in order to continue operating while the sale is closed, but that won't cover expenses for the time during which World International will be conducting its engineering study. Diablo Grande attorney Michael Ahrens said he's working with the insiders to obtain the roughly $900,000 needed to continue operating through the end of September.
This will probably be the last you hear from me until the story for Saturday's paper is posted on the Web site (which should be some time today).
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