Rhodes creditors hope to get paid

For Frank Rodriguez, $11,788 is a lot of money to be owed, especially in these tough economic times.

It's also money the local business owner may never see now that Rhodes Homes, a regular customer of his, is in Chapter 11 bankruptcy reorganization.

Rodriguez, who operates a small house-cleaning company, is among several contractors, subcontractors, and suppliers who have filed unsecured creditor claims in federal bankruptcy court against the companies of land developer James Rhodes.

In the multimillion-dollar world of big Chapter 11 cases, claims of $5,000 or $10,000 are anything but insignificant to business owners struggling to scrape by, said Nancy Rapoport, a bankruptcy expert at the University of Nevada, Las Vegas.

"It's a huge amount for them," she said. "It can even mean life or death for a business."

Rodriguez said the money owed him by the Rhodes companies is for cleaning model homes at Tuscany, a community in southeast Las Vegas, and Rhodes Ranch, a community in southwest Las Vegas.

He and other business owners contacted by the newspaper were reluctant to discuss their claims against Rhodes.

"Things are hard, and every dollar counts," said Rodriguez, who has run Frank Rodriguez Cleaning Services Inc. for 15 years. "I laid off three people. It's just me and my wife now."

As bankruptcy proceedings continue, it is questionable whether unsecured creditors will ever see the money owed them, said Brian Berman, a Las Vegas attorney representing a contractor that expects to file a claim against the Rhodes companies.

"It's certainly not unusual for unsecured creditors to get nothing," he said.

According to bankruptcy filings, Rhodes Homes, the third-biggest private homebuilder in Southern Nevada, has $390 million in liabilities and only $100 million in assets.

Any pending payments for work performed on behalf of the Rhodes companies before their bankruptcy filing in late March cannot be paid without a court order. In general, unsecured creditors are low in the pecking order of creditors, behind banks, the Internal Revenue Service and others.

Berman said a spate of major real estate bankruptcies in Southern Nevada has been hard on companies whose best customers are in these industries.

"If you're unlucky enough to have been the concrete supplier or the electrician or one of the major trades on more than one of those projects, you'll have big gaps in your business," he said.

Whether because of a single bankruptcy or a combination of several, a lot of local companies have been put in awkward financial situations by Chapter 11 filings.

When Lake Las Vegas, a 3,592-acre residential and resort development in Henderson, filed for bankruptcy last summer, it left a trail of unpaid bills.

Chuck Johnston, president of B & P Advertising, said his company hasn't yet collected on its claim in that case of $583,000.

"It's a horrible thing to have something like this happen," Johnston said. "It hurts your business, because it's revenue you counted on."

To maximize potential loan repayments, creditors have tried to keep an eye on the finances of companies that have filed Chapter 11.

Earlier in the Rhodes bankruptcy proceedings, for example, questions arose about the management of the companies. Investment bank Credit Suisse and other secured lenders asked bankruptcy Judge Linda Riegle to appoint a trustee to run the companies, but the lenders later withdrew that motion.

Rhodes got permission from Riegle earlier this month to continue operating his companies with $1.2 million, which will pay for services rendered through June 28.

But that pot of money won't help unsecured creditors lining up to collect debts stemming from earlier work.

So far, about $270,000 has been claimed by companies small and large. On the larger side is the Review-Journal, which has claimed $12,000 for unpaid advertising bills.

The IRS, with a "priority" claim of $820,000, is seeking the biggest chunk of money.

The Rhodes companies have thousands of potential unsecured creditors, according to bankruptcy court records. Attorney Berman said he expects many more claims to be filed before an Aug. 5 deadline.

"There are probably a dozen subcontractors owed $200,000 or more," he said.

An added challenge for unsecured creditors in the Rhodes bankruptcy is trying to identify which of Rhodes' 32 related companies in bankruptcy is the one that owes money.

At a recent meeting of creditors, several local companies expressed concern about how the Rhodes bankruptcy would affect them.

Kerry Gifford, president of Green Valley Electric, told of a check his company got from Rhodes Homes that arrived late March and bounced a few days later.

Gifford had a lot of questions: Was the check fraudulent? Did he have any rights?

Shirley Cho, an attorney for the Rhodes companies, said it was too early to say what would happen.

"The companies are just now going through the process of scrubbing their books and records," she said. "We anticipate the treatment of unsecured creditors will be part and parcel of that whole ball of wax."

Assistant U.S. Trustee August Landis, who is overseeing the bankruptcy case, advised Gifford and other business owners to retain legal counsel. He added that a committee of unsecured creditors would be formed soon to help Gifford, Rodriguez and others have their voices heard.

Bankruptcy attorney Brian Pezzillo, who represents a landscaping company with a claim in the Lake Las Vegas bankruptcy, said he's seeing the ripple effect of big bankruptcies.

"The people that are hardest hit are definitely moms and pops," he said. "There are a lot of people out there that are just struggling."

Contact reporter Alan Maimon at amaimon@reviewjournal.com or 702-383-0404.