Four real estate partnerships that run the 28-story St. Paul Plaza office tower downtown have filed to reorganize more than $42 million of debt under Chapter 11 of the U.S. Bankruptcy Code.
The partnerships are headed by developer David W. Kornblatt, 63, who's been a major player on the Baltimore real estate scene for more than three decades.
Seventy-one creditors are listed in the bankruptcy filing, which took place in U.S. Bankruptcy Court in Baltimore Friday, Mr. Kornblatt said yesterday. The biggest creditor is Maryland National Bank, which is owed $22.1 million.
On the day of the filing, three banks -- Sovran Bank/Maryland, Carrollton Bank of Baltimore and Signet Bank/Maryland -- attempted to put Mr. Kornblatt and his wife, Barbara Kornblatt, into involuntary Chapter 7 bankruptcy.
The Kornblatts personally guaranteed the real estate loans made by the banks to various partnerships and management and development companies with which Mr. Kornblatt is affiliated. The three banks are listed as unsecured creditors.
"In a nutshell, it's an exercise to ensure -- to the best extent possible -- equality in distribution among creditors of the Kornblatts," said Paul M. Nussbaum, an attorney who represents Sovran and Signet. "It's to ensure also that all assets are placed within the jurisdiction of the banks and to prevent dismemberment of the [Kornblatts'] estate, so that creditors can achieve the greatest return possible under the circumstances.
"His debt service to many creditors has fallen substantially behind," said Mr. Nussbaum, who works for Whiteford, Taylor & Preston.
Collectively, Sovran and Signet are owed more than $2.5 million, Mr. Nussbaum said.
He added that an investigation of the Kornblatts assets and liabilities was undertaken, but he declined to say what it revealed.
Mr. Kornblatt said that he has retained a lawyer, John M. Jones Jr., to convert the involuntary Chapter 7 filing -- which would liquidate the Kornblatts' assets -- into a voluntary Chapter 11 filing. That would allow the Kornblatts to work out a debt-restructuring plan with the banks.
The three financial institutions submitted their bankruptcy filing a few hours before the Chapter 11 filing submitted by St. Paul Plaza Office Tower Limited Partners, St. Paul Plaza Upper Garage Limited Partners, St. Paul Plaza Retail Limited Partners and 10-22 East Lexington Associates Limited Partnership, which owns the 270,000-square-foot building at 200 St. Paul Plaza.
Mr. Kornblatt's management firm, the David Kornblatt Co., filed for Chapter 11 bankruptcy in April.