Following the apparent suicide of its chairman and chief executive officer, an Arizona firm has filed for bankruptcy protection.
Mortgages Ltd. has posted a message on its Web site indicating it obtained approval from a bankruptcy judge on June 24 to convert a petition for involuntary Chapter 7 liquidation to a voluntary Chapter 11 bankruptcy reorganization.
"This means, among other things, that we are in a position to secure funding to carry on our business operations and to help our borrowers finish some of the projects under construction," the statement says. "The goal is to see these projects to completion making it easier for our borrowers to secure the long-term financing they need to fulfill their obligations to us and to payoff their loans at maturity so that your principal may be returned to you."
The bankruptcy was filed in Maricopa County in Phoenix.
A Motion to Convert indicates the company has around 2,700 investors. Loans outstanding as of the filing totaled $925 million related to around 70 real estate projects.
"Like virtually every other real estate lender in Arizona ... [Mortgages Ltd.'s] business has been affected adversely by the credit crisis and the real estate downturn that has gripped the country since early 2007," the filing states. "Over the course of the last year or so, a disproportionate number of [Mortgages Ltd.'s] borrowers have defaulted on their loans."
The filing went on to say that escalating defaults created a liquidity crisis for the lender.
The Phoenix-based company was thrown into turmoil when Scott Coles, chairman and CEO, was found dead at home by his 15-year-old son.
The Arizona Republic reported last week that a police report it reviewed did not indicate a cause of death but did say the "relationship and financial problems he was having indicate that this case is likely one of suicide."
In May, Rightpath Limited Development Group reportedly filed a lawsuit against Mortgages Ltd. alleging fraud over a $120 million loan obtained in 2007.
Mortgages Ltd. said it was founded in 1963 by Charles J. Coles and Ronald M. Anatole and has grown to become "the oldest and largest private mortgage bank in Arizona."
The commercial lender reportedly originates, invests in, sells and services short-term real-estate secured loans on Arizona properties. In March, it announced the opening of a new main office.
Mortgages Ltd. Chapter 11 Bankruptcy
Filed June 20, 2008, Case Number 2:08-bk-07465-RJH