History
A self-storage company that sold its main business in 2005, moved into oil and gas on borrowed money, defaulted on its bank line and was put into receivership in November 2011.
2004-2005: Selling the storage business
The company, then called Liberty Self-Stor, began as a self-storage operator in Ohio. On September 7, 2004 it agreed to sell all its facilities except those in Painesville and Gahanna to Acquiport/Amsdell, later called U-Store-It, for $34.0 million cash. Chairman and CEO Richard Osborne's own company was selling assets to the same buyer in the same deal. The price was later set at $33.7 million, with about $24.6 million going to debts and liabilities and about $0.4 million to expenses. Osborne, a 9.6% holder, agreed to vote in favour. The sale closed on April 5, 2005, with about $2.6 million allocated to the company and a $0.20 per share special dividend paid to shareholders. The company kept Painesville and Gahanna and had not decided its future plans.
2006-2007: Turning to oil and gas
By late 2006 the company was heading into oil and gas. On September 28, 2006 it and Osborne, as co-borrowers, took out an unsecured revolving loan of up to $5.0 million from Charter One Bank, mainly to drill new oil wells. In February 2007 the limit was lifted temporarily to $7.5 million, but the company had to give the bank a lien on substantially all its assets. The Gahanna storage facility was sold on May 21, 2007 for $1,400,000. In August 2007 Kykuit Resources, LLC, in which the company was managing member with a 40% stake, bought a 75% interest in Montana oil, gas and mineral leases from Hemus, Ltd. for $2,476,721. An $880,000 demand loan from Osborne-owned Great Plains Exploration helped fund it.
2008-2009: More borrowing and more deals
In February 2008 the company sold 650 Series A Convertible Preferred Shares at $1,000 each, raising $650,000. They paid 8% dividends and could convert to common at $1.00 per share. On March 28, 2008 the Charter One facility was replaced by a $9.5 million revolving loan due August 1, 2009, with $5.7 million drawn and secured by substantially all company assets. In May 2008 Kykuit bought Hemus's remaining lease rights for $250,000, and the company sold a 25% interest in Kykuit to Geis Coyne Oil & Gas for about $1.6 million, cutting its stake to about 19%. Kykuit also agreed to buy about 35,000 acres of Montana leases for $2.5 million, subject to due diligence. Great Plains lent a further $500,000. The record for 2009 is thin, but the Charter One loan matured unpaid on August 1, 2009, and the bank won a $9.5 million judgment on August 20.
2010-2011: Default and receivership
On June 18, 2010 Charter One agreed to hold off enforcement until July 1, 2011, in return for $400,000 monthly payments and pledges of the company's interests in the Alpha and Panzica wells and in Kykuit. The company said it had no cash to repay the line and that there was substantial doubt it could continue as a going concern. The forbearance expired without repayment. On October 3, 2011 Charter One sued to foreclose on its collateral and have a receiver appointed. On November 21, 2011 a federal judge appointed Mark E. Dottore as receiver over the company, Great Plains Exploration and Oz Gas. He took control of the company's records and assets. The court found the defendants owed about $30 million in total, declined to order immediate liquidation, and set a hearing for February 15, 2012. As of November 28, 2011, the filings did not say what would happen to common shareholders, and the company said it was still seeking agreement with Charter One or other financing.
Written from the 13 story beats below (2004 to 28 Nov 2011), which come from the company's own announcements and filings.