Court Grants Kobra Properties Early Motions Designed to Pay Employees, Maintain Operations

U.S. Bankruptcy Judge Michael S. McManus yesterday granted most of Kobra Properties’ “first day” motions allowing the company and its related entities to operate on a business as usual basis as it works to restructure under Chapter 11.

Kobra’s related restaurant operations are not affected by its Chapter 11 filing.

“Judge McManus’ ruling is a positive step toward reorganizing Kobra for the benefit of its creditors and the protection of its employees,” said Leonard Shulman, of Shulman Hodges & Bastian LLP, Kobra’s proposed bankruptcy counsel. “In addition to granting most of Kobra’s motions, the Court provided valuable insights into the type of plan that will ultimately be necessary for Kobra to emerge from bankruptcy even stronger than before.”

The Court granted Kobra’s motion allowing it to pay its employees their pre-bankruptcy wages, salaries, commissions and benefits. Employees will be paid as usual as the bankruptcy case proceeds.

The Court also approved Kobra’s request to treat the bankruptcy cases of its affiliated entities, Kobra Properties, G.P., Kobra Preserve, LLC, and Vernon Street Associates, LLC, as a single entity to be jointly administered during the bankruptcy, thus minimizing the administrative burdens multiple cases would have created, making the process easier for creditors and reducing the amount of professional fees.

In a related motion, the Court approved a consolidated list of creditors and interested parties to whom Kobra may give notice of events occurring during the bankruptcy.

The Court further approved Kobra’s motion to use its cash on hand and future monies received from operations during the bankruptcy for its ongoing expenses. Since these Kobra related entities own 80 properties with an aggregate value in excess of $530 million, these funds are critical for Kobra to maintain its operations during bankruptcy. The Court’s order allows Kobra to use the funds for an interim period pending a final hearing on the issue to be held on December 9, 2008.

The Court deferred ruling on two of Kobra’s motions. The first of those motions requested permission for Kobra to abandon its interest in certain parcels of real property which were either unnecessary for its reorganization and had no value to their respective estates. The second related to its request to employ bankruptcy counsel. The hearing on those motions is scheduled for December 16, 2008.

“We’re very pleased by today’s rulings,” said Kobra founder and president Abe Alizadeh. “We’ll be moving quickly to present our reorganization plan and are optimistic it will be confirmed, allowing us to fairly meet our financial obligations, protect our employees and restructure the company so we emerge from bankruptcy as quickly as possible.”