In a lengthy story on Bloomberg that recaps much of what is already known about the wranglings surrounding the Salander-O’Reilly bankruptcy sale, Philip Boroff notes that a sale will likely take place in June.
The sale can proceed because of concessions made by a secured creditor, First Republic Bank:
U.S. Bankruptcy Court in January approved a settlement between unsecured creditors and Bank of America Corp.’s First Republic unit that cleared the way for an auction. First Republic lent the gallery about $30 million starting in 2002. “The bank had every right to be paid back first from the proceeds of art,” Feinstein said in the interview, citing loan documents.
The bank made “significant concessions” after lawyers for unsecured creditors investigated its relationship with the gallery and threatened to sue, Feinstein said. “We were trying to understand whether the bank knew he was involved in inappropriate behavior,” he said. “And whether it did anything to facilitate it.”
Feinstein wouldn’t say what unsecured creditors found.
Bill Halldin, a First Republic spokesman, said the bank wasn’t aware of wrongdoing by Salander when it lent him money. “In order to avoid the cost and distraction of lengthy litigation, we decided it was the best course to resolve this matter with the other creditors and move forward in the process,” Halldin said in an e-mail.
Under the settlement, unsecured creditors will receive the first $2.5 million from the sale, minus back taxes the gallery owed. What the bank and unsecured creditors ultimately get is based on a complex formula and any sale tally. The court hasn’t ruled yet which creditors get paid.