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As the site where the ball drops on New Year's Eve the office building at One Time Square has become one of the city's most famous landmarks.
The 22-story tower, which has been in bankruptcy since March 1992, might soon become a legal benchmark as well. A decision expected soon from a federal bankruptcy judge could help owners of bankrupt real estate keep their properties while imposing huge losses on their mortgage holders.
The building's owner, One Times Square Associates LP, has proposed a reorganization plan that would reduce the first mortgage on the building to $19 million from $30 million. That plan is being opposed by the first mortgage holder and only large creditor, Paris-based Banque Arabe et Internationale d'Investissement.
Ordinarily in real estate bankruptcy cases, objections by the largest creditor would defeat such a plan. But One Times Square Associates is trying to circumvent the bank's objections by creating a separate class of "distressed" creditors out of the companies that were renting sign space on the high-profile building. Since the law requires only one class of "distressed" creditors to approve a reorganization, the judge could ignore the objection of the secured creditor.
In this case the sign companies are not owed any money. Rather, their claim is the damage they would suffer if their contracts are voided in a foreclosure sale.
The building owners also argue that their plan would actually be better for BAII than the foreclosure auction the bank wants. Partnership officials note...