$40.9M in govt IPI claims must wait behind priority payments

The CNMI government has nearly $41 million in claims listed in Imperial Pacific International (CNMI) LLC’s bankruptcy distribution schedule, but how much the Commonwealth will actually receive will depend on what is left after higher-priority obligations are paid.

That is one of the biggest takeaways from U.S. Bankruptcy Judge Robert J. Faris’ final written order approving the structured dismissal of IPI’s Chapter 11 bankruptcy case.

Schedule 1 of the 34-page order lists $23.25 million for the Commonwealth Treasurer and $17.625 million for the Commonwealth Casino Commission. Combined, the two amounts total about $40.88 million.

But those figures should not be mistaken for payouts.

Under Faris’ order, IPI must first use its remaining estate funds to pay outstanding quarterly fees owed to the Office of the U.S. Trustee and allowed Chapter 11 administrative priority claims, including compensation and reimbursement awarded to professionals retained in the bankruptcy case.

The Internal Revenue Service’s priority tax claim comes second.

Only after those obligations are paid will holders of allowed general unsecured claims receive distributions on a pro rata basis under Schedule 1. That means the available money will be divided proportionally among those creditors rather than each necessarily receiving the full amount of its claim.

The order does not state how much money will ultimately be available for that distribution or what percentage of their claims general unsecured creditors will receive.

The Commonwealth is among a long list of creditors in the distribution schedule.

MCC International Saipan Ltd. Co. is listed at nearly $35 million, while Hughes Hubbard and Reed LLP is listed at $8.58 million. Joshua Gray is listed at $4.64 million, DFK Limited at $4.43 million and Ozcan Genc, Hasan Gokce, Suleyman Kos, and others at $3.6 million.

Fujitec Pacific Inc. is listed at $2.82 million and Donnie Vince Seman Fejeran at $1.5 million.

Other Commonwealth government entities appearing in the schedule include the Bureau of Environmental and Coastal Quality’s Division of Coastal Resources Management at $240,000 and the Department of Labor at $66,350.

The lengthy Schedule 1 also contains claims involving businesses and individuals, underscoring how many parties remain tied to IPI as its bankruptcy winds down.

Faris signed the dismissal order last Aug. 13, and it was filed last Aug. 14 with the U.S. District Court for the Northern Mariana Islands. The order followed an Aug. 4 hearing and granted in full the joint motion filed by IPI and the Official Committee of General Unsecured Creditors.

The bankruptcy case, however, does not end simply with the filing of Faris’ order.

IPI must first complete the required distributions and then file a Notice of Dismissal stating that the conditions for dismissal have been satisfied.

Once that notice is filed, IPI’s casino license will be deemed rejected, the Chapter 11 case will be dismissed, all other pending motions will become moot and future hearings on those motions will be canceled.

The Official Committee of General Unsecured Creditors will also disband, and the retention of professionals working for IPI and the committee will terminate.

The structured dismissal does not erase what has already happened in the bankruptcy case.

Faris ordered that prior court orders, findings, releases, stipulations, settlements, rulings and judgments—including the Sale Order and Sale Stipulation Order—remain in full force and effect despite the dismissal.

The order also provides limited protection from liability to IPI’s directors and officers, committee members and retained professionals for certain acts or omissions connected to the Chapter 11 proceeding from the bankruptcy petition date through dismissal.

That protection expressly does not apply to willful misconduct, gross negligence, fraud or criminal misconduct as determined by a final order of a court with jurisdiction. It also does not apply to certain sanctions. The order further states that the protections do not release or shield claims arising from conduct before IPI’s bankruptcy petition date.

Faris will retain jurisdiction over matters involving the implementation, interpretation and enforcement of the dismissal order. The order also preserves the right of a party in interest to seek to reopen the Chapter 11 case to administer additional estate assets.

IPI filed for Chapter 11 bankruptcy protection in April 2024.