The $63 million bankruptcy case of Summerville attorney and developer Arnold Goodstein can't move along fast enough for a Midlands bank.
First Palmetto Savings Bank, which said Goodstein owes it $4.9 million, said it wants to clear the bad loan from its books as quickly as possible, because federal regulators are pressing the issue, according to court testimony Tuesday.
A lawyer for the Camden-based lender urged U.S. Bankruptcy Judge David Duncan to address the issue soon so the bank can sell off the loan collateral and recoup part of its debt.
If First Palmetto does not meet a Sept. 30 deadline, "there will be another party in here trying to liquidate this loan," said the bank's attorney, William Short. "And that would be the federal government."
Duncan cautioned that the newly appointed trustee in the case, attorney Michelle Vieira of Myrtle Beach, might need more than a few weeks to sift through Goodstein's finances.
"Bankruptcy court already moves at warp speed compared to the rest of the judicial world," Duncan told Short at a hearing in Charleston.
Since the financial meltdown two years ago, bank regulators have pressing lenders to strengthen their balance sheets, partly by shedding their bad real estate loans.
First Palmetto is no exception, said Samuel Small, general counsel.
"I think we're consistent with any other bank in the country," Small said. "We have a very strong capital position, and our allowance for loan losses remains healthy. ... From that standpoint, we've been very fortunate."
Small said the request for a speedy resolution of Goodstein's debt stemmed from the bank's desire "to address distressed loans or assets as quickly as we can. We'd rather go ahead and deal with it today. Why put off a problem?"
Small said the nearly $5 million loan was made "within the due course of business."
"It's not really atypical for an institution of our size," he said.
First Palmetto reported $729.8 million in assets on June 30 to the U.S. Office of Thrift Supervision.
To secure the loan from the bank, Goodstein pledged shares he owned in a Dorchester County industrial park. His ownership in that property is one of his largest assets.
It's unlikely that the sale of the property will generate enough money to pay off the First Palmetto debt; a recent appraisal pinpointed the value of the land at about $1.7 million.
Goodstein, a former state lawmaker and highway commissioner who serves as general counsel for the Charleston County Aviation Authority, sought protection from creditors by filing for personal bankruptcy in June.
The case took a fresh turn Tuesday when Duncan converted the case from a reorganization to a liquidation. Creditors are expected to lose most of their money.
Bankruptcy filings detail Goodstein's roughly $63 million in estimated debt he owes to banks and others. Much of the money was borrowed to buy land for real estate developments that failed.
He owes $14.2 million to Bank of America and $3.1 million to Wachovia, according to court filings. A Myrtle Beach family business group, Tiente Limited Partnership, is the largest creditor, with a claim for $40 million.
Court records estimated that Goodstein has total assets of about $2.9 million. The figure does not include a proposed $1.5 million legal settlement from a lawsuit filed in Horry County.
"It looks as though we could have a significant amount of money coming into the case," said Goodstein attorney Geoff Levy.
Reach Katy Stech at firstname.lastname@example.org or 937-5549.