Loan OK'd for bankrupt builder

By Andrew Gomes
Advertiser Staff Writer

A bankruptcy judge has approved a loan that would allow defunct factory-made homebuilder Hawaiian Palisade Homes to complete six partially constructed houses at the company's Kapolei factory.

Westlink Construction Inc., a California company interested in acquiring Hawaiian Palisade, agreed to lend Hawaiian Palisade up to $300,000 to restart operations under a proposal approved by Judge Lloyd King late last week.

Hawaiian Palisade President Art Smith called the loan, which is expected within two weeks, the first major step in reviving the business that was forced into bankruptcy by creditors in June before shutting down last month and leaving about 120 customers without homes.

Who will run the company, however, remains an issue. The Office of the U.S. Trustee, an arm of the Justice Department, has asked King to appoint a Chapter 11 trustee to oversee company operations.

Typically in Chapter 11 reorganization cases, a debtor is left to run its business. But in this case, an independent controller is being sought because the state has alleged in a lawsuit that Smith misrepresented the quality and certification of Hawaiian Palisade homes and the company's ability to complete and deliver the houses.

Creditors also have no confidence in current management, according to Curtis Ching, an attorney for the U.S. Trustee.

"Serious allegations of fraud and mismanagement have been made against the debtor's principals. ... If this Chapter 11 case is to work at all, a trustee needs to be appointed," Ching said in the government's motion.

Hawaiian Palisade's bankruptcy attorney, Chuck Choi of Wagner Choi & Evers, declined to comment on the trustee motion, which will be heard by the court Sept. 3.

"We just need to get some of these homes completed as soon as possible," he said.

The loan will allow Hawaiian Palisade to complete six homes in 45 days or less, Smith said. The homes were bought by people who took out mortgages with Central Pacific Bank. Hawaiian Palisade received about half of the mortgage money from the bank, and the bankruptcy estate will receive the balance upon completion.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.