DBSI Latest News from Bankruptcy Court

DBSI's bankruptcy counsel firm is Young Conaway in Delaware. All
the bankruptcies were filed in Delaware
There appears to 10-20 lawyers representing Tic ownership groups,
the 4 lead attorneys are Rathbone, Thomason, Hannon, Kaplan (names
not firms)
A receiver or receivers will likely be assigned to each property
A credit committee will likely be created soon....representing the
creditors which are TIC's, real estate lenders and syndicated note
holders
There are no secured creditors, and the primary unsecured creditors
are TIC's, real estate lenders and syndicated note holders.
There are 237 master lease TIC properties
As far as TIC investors, the leases are to be accepted,
rejected/modified within 90 days by DBSI.
The first motions to reject leases will be this Wednesday where they
plan to reject 18 (properties where the loans are in default). The
remaining master leases to be dealt with as follows: accept 40
(which cash flow above the master lease rent), reject or modify +-
140 where the cash flow is enough to pay debt service, but not equal
to the master lease rent.
If the TIC's elect to not modify the master lease as to the rent
definition on their property as will be requested by DBSI, then the
lease would be rejected by DBSI. If rejected, then the TIC's would
need to unanimously find a new asset/property manager. There may be
a possibility of assigning the master lease under modified terms to
a new sponsor/asset manager, but this is more time consuming and
would require negotiations with lenders (I assume attorney's
representing a TIC property could make this request to the court as
an alternative to terminating the lease or allowing DBSI to continue
as master tenant under modified terms).
Rejecting the master lease may be a loan default, it is recommended
that if TIC's decide not to accept the amended master lease terms
put forth by DBSI, then they should obtain prior lender approval to
either assign the master lease to another asset manager/TIC sponsor
or terminate it and replace it with an asset management contract
It may be best to not "remove" a property from the DBSI bankruptcy
estate until TIC's have an agreement with the lender that the loan
will not be in default after it is removed from bankruptcy and that
the requested lender approvals for a modified or terminated master
lease or new asset manager have been granted
DBSI is only recognizing lawyers that have at least 51% of the TIC's
engaged for any particular property and having standing to negotiate
for the entire group. They respond to individual investors as
necessary though.