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A flurry of emergency motions in court last week have tried to stymie TKO’s motion filed Dec. 29 by CEO Garry Kurtz that threatened to cease operations after the judge overseeing the company’s Ch. 11 bankruptcy reorganization declined to approve a settlement agreement between TKO and the Bank of Montreal. Â
Judge Jeff Bohm, of the U.S. Bankruptcy Court, Southern Texas, did approve an expedited emergency hearing on the matter for Dec. 29, but it was rescheduled for late in the afternoon Jan. 3, at which time it was rescheduled for Jan. 9. Court records show that Kurtz at the Dec. 29 hearing rescinded orally the notice he gave that he would shut the business on Dec. 30.
The committee of unsecured creditors had requested the emergency hearing on Dec. 29. In addition, the committee in its motion has asked the court to appoint for TKO either a chief restructuring officer or a trustee to oversee the matter, as well as to enjoin TKO from shutting its business or in any way from terminating or disrupting the operations, as Kurtz implied he would do in the Dec. 28 hearing when the court did not approve the Bank of Montreal matter.
“Ultimate game of chicken”
“During the hearing, the Debtor’s sole director, Garry Kurtz, in the ultimate game of chicken, testified that if the settlement were not approved he would terminate the Debtor’s operations. Now that the court has denied approval, Mr. Kurtz, without business reason or justification, has proceeded with his gambit,” wrote the committee of unsecured creditors in its motion filed.
The motion continued: “Mr. Kurtz testified that the Debtor has significantly greater value as a going concern than in liquidation, that he believes in the business, and that he believes he can make the business work. The testimony also clearly evidenced that a liquidation would significantly reduce the value of the assets. Yet for some reason, Mr. Kurtz has determined that his only option is to terminate the Debtor’s operations. Apparently, Mr. Kurtz has determined that there is no reason to continue the business. As this court found, the Debtor’s sole officer and director suffers from a conflict of interest and has failed to explore alternatives.”
The committee claimed in its motion that shutting down the business would mean “irreparable harm to the Debtor, the estate and creditors if this motion is not granted.”
Shut down only to resurface?
According to a footnote on the committee’s motion, there is a suspicion that TKO will resurface under another company name if this one member of the TKO family of companies is closed down.
Per the motion’s footnote: “There is belief among members of the Committee that Mr. Kurtz will usurp the business of the Debtor and begin new operations in one of the other TKO family companies or under a new company either in the United States or Canada. Last week a creditor informally advised the Committee that it believed TKO and its business would be continued in another form and had received indications from Mr. Kurtz that the business would continue. The relief requested by this Motion is necessary to ensure that the assets of the Debtor are protected and maintained and that the business and operations are not improperly usurped.”
As SNEWSÂ® investigation revealed in a Nov. 4, 2005, story (Click here to see that story, “TKO’s penny-stock offering may have been attempt to avoid bankruptcy” ), TKO is not just TKO. There is in fact a whole family of TKO companies, of which one â€“ TKO Sports Group USA Ltd. based in Texas â€“ filed for reorganization on Oct. 11, 2005. Texas-based TKO Sports Group USA Ltd., a Delaware company, is actually a wholly owned subsidiary of TKO Holdings Inc., a Florida company, which also lists its principal address in Houston, Texas, but lists its only officer as Garry Kurtz, who is also CEO of TKO Sports Group USA. Another wholly owned subsidiary is Technical Knockout Inc., also a Florida company listed as “inactive” with an address in Florida and a mailing address in New York. Papers still on file list officers of Technical Knockout as Kurtz and Mitch Carlin, also senior vice president at TKO Sports Group USA.
Â The committee has told the court its members believe TKO’s reorganization can be successful; however, “to do so, however, will require that disinterested, appropriate management be installed and that the status quo be maintained.”
SNEWSÂ® View: When SNEWSÂ® found a rather convoluted trail of companies in various states and countries, the suspicion was even at that time raised to us as the committee has said â€“ that there could be unnamed paths the company could take. At this time, of course, nobody really knows what course it will take, although calling Kurtz’s action “the ultimate game of chicken” may not exactly endear committee members with him. Of course, endearing themselves is not the primary goal of the committee; rather, members want as much as they can get from their investments or returned to them from money owed. This matter is bound to take even more turns quite soon.