April 18, 2013
By Bob Coleman
Editor, Coleman Report
It’s been almost a year since the SEC seized Northern California SBA lender Small Business Capital.
During that time the court-appointed receiver has been winding the operations of the firm previously owned by Mark Feathers.
But without a fight by Mark Feathers who has ID’d himself, “The Honey Badger.” The Receiver claims Feathers has emailed him over 200 times since November “at all hours of the day and night, on Saturdays and Sundays and even on Christmas Eve” making open and inappropriate threats against him and his attorneys.
In just the last two months, Feathers, who is acting as his own attorney, has peppered the court with 14 motions against the Receiver.
If you want to look behind the curtain about SBC’s loan portfolio there is detailed status report of all problematic loans, including an allegation of transferring an impaired loan to an affiliate in an effort to shore up the income statement.
Here is the Receiver description of the loan . . . .
Sweet Fingers: This property is located at 464 East 14th Street, San Leandro, California which includes an operating restaurant called Sweet Fingers on the first floor and a residential apartment on the second floor. At the end of 2006, this loan was purchased by SB Capital from Coast Capital, a prior entity that Mark Feathers managed. The original principal balance was $552,500 with an unpaid balance at the time of the foreclosure of $600,535. The loan was transferred to IPF. In July 2008 IPF foreclosed on the property. SB Capital then assumed the debt as borrower, and increased the loan amount to $700,000, and made interest payments to IPF, thus creating phantom net income on a non-performing asset. The loan was eventually transferred to SPF, then back to IPF. Moreover, IPF (post foreclosure) advanced $200,000 to SB Capital on the non-performing asset, carried on the books at $900,000. Meanwhile, SB Capital leased it to the foreclosed borrower for $4,500 per month. As discussed in previous reports, the tenant was delinquent on rent. The Receiver therefore filed a complaint for unlawful detainer. The Receiver settled the complaint by a Stipulated Judgment which provides for the tenant to pay $3,500 per month in rent beginning November 15, 2012 and continuing on a month-to-month basis or until the property is sold. If the property is sold to an owner/user, then the tenant has agreed to vacate within 60 days. In the event of a default on either the monthly rent payments or the agreement to vacate the property, the Receiver will file the Default Judgment for immediate possession and a money judgment for $65,000 in back rent. As of March 31, 2013, the tenant was current on the lease payments.
A broker’s opinion of value dated August 2012, based on comparable sales, values the property at $449,000. The Receiver initially established a reserve for the loss on the sale of this asset of $288,000 (or 32% of the value of the property). In September 2012, the Receiver listed the property for sale at $449,000 based on a careful review of comparable sales in the area. To date, no offers have been presented and the Receiver is considering a price reduction.
The treatment of this loan and REO is troubling because it appears to have been used as a means of overstating IPF net income, disguising a defaulted loan, and transferring money from IPF to SB Capital.