January 5, 2000
Arizona foundation will liquidate assets
___PHOENIX (BP)--The Baptist Foundation of Arizona will liquidate its assets in an effort to repay nearly $600 million owed to investors.
___The decision was announced after recent meetings with more than 4,000 investors, according to foundation spokesman Lew Phelps of the Los Angeles public relations firm Sitrick and Co.
___Phelps said the investors overwhelmingly rejected the foundation's restructuring plan proposed as part of its Chapter 11 bankruptcy filing in early November. In Chapter 11 bankruptcies, a company is protected from creditor suits while it develops a plan of financial reorganization acceptable to the court and its creditors.
___According to court documents, the foundation listed liabilities of $640 million, including about $590 million claimed by 13,000 investors. Estimates of the foundation's assets range from $160 million to $200 million.
___Under the original plan, investors would have been given two options. The "cash out" option would have paid investors 20 percent of their original investment. The other option would have given investors shares in a new publicly-held company that would be formed to hold and manage the foundation's assets.
___Since that plan was rejected, the foundation's restructuring committee will propose a new company, with liquidation shares instead of stock. The sole purpose of the new company will be to sell off the company's assets and distribute the proceeds to investors.
___The latest proposal is pending approval from a committee representing investors before it goes to bankruptcy court.
___Phelps said he anticipates an orderly liquidation of the foundation's assets, which include real estate, subdivisions and golf courses. The entire process could take several years to complete, however.
___"It's not going to be a fire sale," he said. A quick disposal of properties could bring in prices far below the estimated values, Phelps added.
___While foundation officials have said all investors will be treated equally, some don't hold out hope for recovering their money.
___"I'm not going to be getting very much of my money," Edna Hinkle told a Phoenix newspaper. "If I could get our original investment of $20,000 back, I would be happy."
___Hinkle, 73, of west Phoenix, and her husband had entrusted the foundation with $63,000, according to the article in the Dec. 16 edition of the Arizona Republic. The Hinkles are members of First Southern Baptist Church of Glendale, Ariz. Their church reportedly invested $1.5 million in foundation holdings to help pay for a new building.
___Joan Kraska, on the other hand, told the Arizona Republic she was pleased with the proposed plan. "I couldn't be happier. I'm thrilled," she said. "To me, it's like Christmas. I think it's our only hope."
___The foundation's troubles began in August when it was accused of securities fraud and was ordered by the state to cease and desist selling securities. The Arizona Corporation Commission likened the foundation's practices to a complex "Ponzi" scheme. Three of the foundation's top officers were later fired, two offices in Arizona were closed and 72 employees were laid off.
___No other state Baptist foundation sold the types of services the Arizona foundation marketed nationwide. In fact, leaders of the Baptist Foundation of Texas and other state Baptist foundations had expressed significant concern about the practices of their Arizona colleagues.
___Although the Arizona Baptist Foundation is an agency of the Arizona Southern Baptist Convention, it has no direct link to either the Southern Baptist Convention or the Baptist General Convention of Texas, and no other Baptist body had authority over the foundation.Contents/ Masthead / Why We're Here / Links / Archive / E-mail us/ SUBSCRIBE!