Marcel Contraband Pointe - Case Summary

Business Description

Marcel Contraband Pointe, LLC (the "Debtor") is a Texas-based limited liability company that owns and is developing a mixed-use commercial project known as Marcel Contraband Pointe (the "Property").

• The Property comprises approximately 8.6 acres of real estate located in Lake Charles, Calcasieu Parish, Louisiana, at the intersection of Nelson Road and Contraband Bayou.
• The project was designed as a destination retail and dining center to capitalize on significant regional infrastructure improvements, including the Nelson Road Extension and the nearby Interstate 210 interchange.

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Corporate History

Development of the Property commenced in 2022 and has progressed through multiple phases, including site preparation, utility installation, and the construction of parking facilities and commercial buildings intended for retail, restaurant, and office tenants.

• Significant construction milestones completed to date include the pouring of the concrete foundation for an anchor tenant restaurant and the installation of underground utility infrastructure across the site.

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Operations Overview

The Debtor's primary asset is the Property, which has an estimated current value of $17,880,000. As of the petition date, the Debtor’s other assets consist of approximately $860 in cash. The Property currently has two tenants, with essential utility services in place to maintain the asset in marketable condition and support tenant operations.

Tenant Arrangements

• The principal tenant is The Sculptry, LLC, which occupies commercial space under a shopping center lease.
• The Debtor has a prepetition contractual obligation to The Sculptry for a tenant finish-out allowance, with a remaining balance of $147,330. Prepetition, this obligation was being satisfied through monthly credits against rent and waived Common Area Maintenance (CAM) payments.
• A post-petition lease amendment seeks to formalize this arrangement and authorize the tenant to perform an additional $18,884 in improvements, with the cost to be added to the credit balance and satisfied through future rent and CAM waivers.

Liquidity and Cash Management

• The Debtor anticipates that rental income from its two tenants will provide sufficient liquidity to pay post-petition utility charges and other operating expenses as they become due.
• The Debtor is seeking authority to use cash collateral to fund its operations during the Chapter 11 case.

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Prepetition Obligations

As of the petition date, total claims against the Debtor’s estate are approximately $21.6 million, exceeding the Property’s estimated value of $17.88 million by approximately $3.7 million. The Debtor’s capital structure is summarized below:

Secured Debt

• First Federal Bank of Louisiana ("First Federal"): Holds a first-priority mortgage lien on the Property securing indebtedness of approximately $18.65 million.
  • The debt is evidenced by a Multiple Indebtedness Mortgage and is further secured by a Pledge of Leases and Rents, granting First Federal a security interest in all income generated by the Property.

Supplier Claims and Mechanics' Liens

• The Debtor has incurred approximately $2.96 million in general unsecured claims, primarily owed to suppliers, subcontractors, and vendors for labor and materials related to the project's construction.
• Pursuant to Louisiana's Private Works Act, 25 suppliers and subcontractors have filed statements of claim and privilege (mechanics' liens) against the Property. These liens are junior to First Federal's first-priority mortgage.
• Principal supplier claims include:
  • Rhino Rhenovators, LLC: ~$918,926
  • Allstar Plumbing & Maintenance, LLC: ~$457,668
  • Charlies Electric, LLC: ~$398,578
  • BFS Group, LLC dba Panel Truss: ~$299,636
  • PAI Ready Mix, LLC: ~$170,166

Other Claims and Related Litigation

• The Sculptry, LLC: The Debtor has an unsecured contractual obligation of $147,300 to its tenant related to a finish-out allowance.
• Louisiana Department of Revenue: A disputed priority tax claim of $167 for Corporation Income and Franchise Tax.
• Certain suppliers have initiated litigation against the Debtor's affiliates and guarantors, seeking to hold them personally liable for unpaid amounts. These lawsuits create potential liability for the same parties that may be pursued by First Federal for any deficiency claim following a sale of the Property.

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Events Leading to Bankruptcy

The Debtor’s financial distress stems from its insolvency, as the Property's fair market value of $17.88 million is insufficient to satisfy the approximately $18.65 million owed to its senior secured lender, First Federal. This leaves First Federal undersecured by approximately $774,000 and provides no recovery for the nearly $3 million in junior mechanics' liens held by suppliers and subcontractors.

• Prior to the bankruptcy filing, the Debtor engaged in extensive but ultimately unsuccessful out-of-court negotiations to settle the supplier claims.
• The existence of pending litigation against the Debtor's affiliates and guarantors further complicated an out-of-court resolution.

Strategic Rationale for Chapter 11

The Debtor determined that a Chapter 11 proceeding was the most efficient and value-maximizing path forward compared to alternatives like a Louisiana executory process foreclosure.

• A state-law foreclosure would trigger a mandatory 3% sheriff's commission on the sale price, resulting in cash costs of $450,000 to $536,400.
• In contrast, the estimated administrative costs of the Chapter 11 case are projected to be approximately $130,000, preserving an additional $320,000 to $406,400 for creditors.
• The Chapter 11 process also provides for a structured auction to attract competitive bidding and enables a global resolution of claims against the Debtor and its affiliates.

Restructuring Support Agreement

Prior to filing, the Debtor and First Federal executed a Restructuring Support Agreement (RSA) to govern the Chapter 11 process and the sale of the Property. Key terms of the RSA include:

• Stalking Horse Bid: First Federal has agreed to serve as the stalking horse bidder with a baseline bid of $15 million, establishing a floor price for the auction.
• Credit Bidding: First Federal will retain its full credit bidding rights up to the amount of its allowed secured claim.
• Administrative Expense Carve-Out: The RSA provides for a carve-out of up to $130,000 from sale proceeds to pay for approved administrative and professional fees.
• Settlement Fund: The plan contemplates the creation of a settlement fund, funded by the Debtor's equity owners and affiliates, to provide a distribution to supplier claimants who agree to provide consensual third-party releases.
• Milestones: The RSA includes an expedited schedule targeting completion of the auction and plan confirmation by January 14, 2026.