The oldest two-year junior college in Texas, which has faced serious financial struggles in recent years, on Wednesday was back in the United States Bankruptcy Court Eastern District of Texas, where Judge Bill Parker was updated on the school's plans.
Attorney Hugh Ray III said millions of dollars are held by foundations for the benefit of the institution, and attorneys are trying to find out why it hasn't been given.
Therefore, Lon Morris is requesting various documents, such as those that “create a beneficial interest in Lon Morris specifically” and “show assets held for the benefit of (Lon Morris),” according to bankruptcy court documents.
Ray and Lon Morris Chief Restructuring Officer Dawn Ragan are hopeful the entire amount owed to former employees can be recovered, Ray said. That amount entails $385,000 in priority wage claims, plus $259,000 in general unsecured claims.
“We expect that the Methodist foundations will cooperate in providing funds that belong to the college to help out those employees who are hardest hit,” Ray wrote in an email.
Wednesday's hearing marked the latest for Lon Morris.
The financially strapped institution filed a voluntary chapter 11 bankruptcy petition in July after bleeding millions of dollars since at least the 2007-08 school year, when college representatives say the school embarked on a costly plan to grow enrollment.
About 100 students were expected to attend Lon Morris this fall, and now other East Texas community colleges have stepped in to help accommodate them.
Another hearing is scheduled for Oct. 31, at which time the judge will consider the college's request for authority to employ Tranzon Auction Resolutions, who will sell “a substantial amount of the real property” of the Jacksonville estate.
According to the application to employ Tranzon, the auctioneer would market and sell the real property, and certain personal property.
Lon Morris has an estimated 112 acres of real estate with various buildings such as dorms, athletic facilities, administration buildings, a library, a chapel and admission buildings, the application states.
“Lon Morris believes, in the exercise of its business judgment, that the proposed sale of the property will generate the most value for the benefit of the creditors of the estate with the least amount of risk of further diminution of the value of the estate,” attorneys wrote in the application. “The alternative is to list the property with a broker, a process that could take months, if not longer, and has no greater assurance of generating a sale.”
Ray said Wednesday the original proposed auction date was on or about Nov. 15, but that is a tentative date that could change.
The college still could be purchased by an educational institution or another buyer, provided the bankruptcy court authorizes Lon Morris to go through the auctioning process as it requested.