Investors and creditors associated with Old Cutters Inc., the corporation behind the struggling Old Cutters subdivision on the east side of Hailey, will soon be in bankruptcy court.
The Chapter 11 bankruptcy filing could lead to a re-organization of debts to keep the company solvent. It could also lead to a wiping clean of some company debts, including substantial debts owed to the city of Hailey.
A "meeting of creditors hearing" is set for Sept. 9 at 10:30 a.m. in the Jerome County Courthouse.
Hailey City Attorney Ned Williamson would not comment on how the city might respond at the bankruptcy court hearing. He said a "contested proceeding" would likely result from the bankruptcy filing, leading to a court decision on what debts, if any, are owed to the city.
Williamson said he would work to ensure that Hailey receives "the full amount due under the annexation agreement."
"(John) Campbell still has possession of the property," said Williamson.
Old Cutters Inc. was formed in 2005 by developer John C. Campbell and his wife, Jennifer Campbell, and two associates, Kipp Nelson and Steve Brown. Nelson and Brown completed the sale of their interests in the company to Campbell in May 2011. Kelly Malone is listed on court documents as treasurer of Old Cutters.
The Old Cutters property was annexed into the city in 2006 after three years of negotiations. Plans called for 149 single- and multi-family units, including 24 affordable housing units. The developer was required to build one affordable unit for every five market-rate units.
Only a handful of lots were developed before the onset of the recession. The Hailey City Council accepted an 1883 water right in lieu of the first annual installment of annexation fees totaling $3.87 million. It also renegotiated the terms of deed restrictions on community housing in the development.
Last summer, John Campbell offered to give the city of Hailey eight lots within the development in lieu of an $880,000 annexation fee payment, but the deal fell apart due to public pressure and some last-minute changes in the proposed agreement.
Old Cutters Inc. attorney Joseph M. Meier filed a petition for Chapter 11 bankruptcy proceedings in Boise on July 29. The petition lists three primary creditors: Mountain West Bank, the city of Hailey and Old Cutters Investment LLC, with claims totaling $20.6 million dollars against Old Cutters Inc. John and Jennifer Campbell are listed with the Idaho Secretary of State's Office as members of Old Cutters Investment LLC, and Malone is listed as manager.
Old Cutters Inc. assets are listed as totaling about $3 million. Almost all of the assets are land in the development.
Secured claims against the company total about $12.5 million, with Mountain West Bank claiming $9.5 million, the Blaine County tax collector claiming about $330,000, and the city of Hailey claiming $2.45 million.
An unsecured claim of $8.2 million has been made by Old Cutters Investment LLC.
Hailey's claim of $2.5 million stems from an annexation agreement written in 2006. The petition lists the claim as "disputed." Court documents state: "Debtor does not believe it is obligated to city of Hailey for any amount due to the invalidity of the remaining terms of the [annexation] agreement."
The petition also states that Old Cutters LLC disputes the enforceability of the affordable housing requirements required by Blaine County, established in 2006.
John Campbell could not be reached for comment.
Tony Evans: tevans@mtexpress.com
