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Wingspan Portfolio Advisors files for bankruptcy

Is this the end for the once-mighty special servicer?

Citing a massive gap between its assets and liabilities, Wingspan Portfolio Advisors filed for Chapter 7 bankruptcy protection in United States Bankruptcy Court for the Eastern District of Texas.

According to documents obtained by HousingWire, Wingspan filed for bankruptcy on Monday, listing $1,236,986.76 in assets and $12,070,346.87 in liabilities.

Wingspan’s filing breaks down its liabilities into three categories: creditors holding secured claims, creditors holding unsecured priority claims, and creditors holding unsecured non-priority claims.

According to the filing, Wingspan owes $2,144,755.54 to creditors holding secured claims; $2,360,947.20 to creditors holding unsecured priority claims; and $7,564,644.13 to creditors holding unsecured non-priority claims.

While the filing does not go into detail about how Wingspan ended up $10.833 million in the red, the filing does detail how much Wingspan’s business has fallen off in recent years.

In a section of the filing entitled “statement of financial affairs,” Wingspan discloses that it lost $16,382,387.29 in 2013; $24,857,052.36 in 2014; and $6,058,617.66 from Jan. 1 through July 3 of this year.

In total, Wingspan lost more than $47.29 million in the course of doing business in the last 30 months.

The bankruptcy filing is the latest in a series of calamitous developments that have crippled the once-mighty special servicer.

Last October, HousingWire reported that Steve Horne, the founder, CEO and president of Wingspan, was removed from the company he founded in 2008.

At the time, Wingspan also announced a “multi-million dollar capital infusion from its stockholder investor group,” and the “divestiture” of Dimont & Associates, which Dimont itself announced at the same time.

When Wingspan purchased Dimont, a hazard insurance claims management company, in 2013, the deal required Wingspan to take on mezzanine debt, which was allegedly new to Wingspan’s operations, a source told HousingWire.

A source told HousingWire that Wingspan’s debt holders began to grow unsteady when Wingspan allegedly failed to pay even the first payment due. The source said that Dimont was allegedly divested from the company in order to satisfy the debt taken on for its very purchase.

Wingspan also went through several rounds of layoffs at its various facilities, although the company repeatedly referred to the layoffs as “furloughs.”

Last month, Wingspan laid off the remaining 150 employees at JPMorgan Chase’s (JPM) mortgage servicing operations center in Melbourne, Florida in February 2013.

In addition to the Melbourne layoffs, Wingspan also laid off employees at its Monroe, Louisiana location and hundreds of employees at a location in Frisco, Texas.

When Horne founded Wingspan in 2008, the company was touted as a “high touch” special servicer. “There are very few specialists out there with the tools and skills needed to cure these nonperforming mortgages, and so many times these loans, and especially the ones with low equity or low balances, are given up on,” Horne said at the time.

Shortly after opening its doors in October 2008, Wingspan received an injection of funding from JAM Equity Partners, LLC, when the fund invested $2.5 million in Wingspan.

In the years since the company was founded, Wingspan has grown exponentially. 

The company’s rapid growth was fueled by default servicing contracts with Bank of America (BAC) and others. In 2013 alone, the company acquired the JPMorgan Chase mortgage servicing facility in Melbourne, Florida, acquired JPMorgan Chase’s customer service center in Monroe, Louisiana, and acquired Dimont & Associates in May 2013.

Listed among the creditors holding secured claims against Wingspan is Cisco Systems Capital Corporation, which Wingspan owes $444,651.31 for “disguised financing (master lease agreement)” and “purchase money security.”

Also listed among the secured creditors is Dell Financial Services, with a claim of $358,000.09 for “disguised financing (master lease agreement).”

In Wingspan’s bankruptcy filing, it also lists 30 pages of creditors holding unsecured priority claims. Included in those 30 pages are all of Wingspan’s current employees, who are owed “wages, salaries and commissions.”

Based on the amounts listed for each employee, it appears that each employee is owed two weeks of pay.

Also listed among the creditors holding unsecured priority claims is the Department of the Treasury and the Internal Revenue Service.

According to the bankruptcy filing, Wingspan owes $1,920,940 to the IRS.

Wingspan also owes $26,879.18 to the Brevard County Tax Collector in Florida; $146,147.26 to the Collin County Tax Assessor-Collector in Texas; $19,850.88 to the Dallas County Tax Office in Texas; and $31,459.90 to the Denton County Tax Assessor/Collector in Texas.

Wingspan also lists 170 pages of creditors holding unsecured non-priority claims.

Among those is CP I Gramercy LP, to which Wingspan owes $1,392,448.95.

Missing among Wingspan’s bankruptcy filing materials is the required master mailing list matrix.

According to another court document obtained by HousingWire, the court issued an order requiring Wingspan to provide an alphabetized creditor list which includes the name and last known mailing address for every listed creditor, which Wingspan did not include in its initial filing.

In the order, Chief United States Bankruptcy Judge Brenda Rhodes writes the following:

The Court is of the opinion that such an omission prevents creditors and parties in interest from receiving timely notice of this bankruptcy filing and precludes the prompt scheduling of the meeting of creditors required by 11 U.S.C. §341(a). Thus, the failure of the Debtor to adhere to the requirements of the Federal and Local Rules of Bankruptcy Procedure prevents the prompt administration of this case and constitutes an unreasonable delay by the Debtor that is prejudicial to creditors.

Rhodes issued an order stating that if Wingspan fails to file the master mailing list matrix within seven days, the case would be dismissed “with prejudice.”

Again, from the court’s order:

IT IS FURTHER ORDERED that, in the event that the Debtor fails to file a Master Mailing List (matrix) within 7 calendar days of the entry of this Order, absent a further order of the Court extending such deadline for cause shown, this case shall be dismissed, pursuant to §349(a) of the Bankruptcy Code, without further notice or hearing and with prejudice to the rights of the Debtor to file a subsequent petition under any of the provisions of Title 11, United States Code, for a period of ninety (90) days from the entry of the order of dismissal.

HousingWire made a request for comment on the bankruptcy to Wingspan Senior Vice President of Marketing, Communications and Industry Relations Guy Davis. As of press time, HousingWire had not received a response.

Davis’ phone number appears to be disconnected and calls to Wingspan’s main phone line did not even ring.

HousingWire also attempted to contact the attorney listed on Wingspan’s bankruptcy filing as the “debtor’s attorney,” but as of press time had not received a response.

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