Bankruptcy judge clears way for First NBC Bank’s estate to pursue plan for marketing tax assets
Those credits could, theoretically, be used to offset federal tax liabilities on future earnings and potentially to provide financial relief for the company's creditors and possibly its shareholders. But that path is far from assured, and any plan for taking advantage of the tax credits is still in its infancy.
Attorneys involved in the case offered varying assessments of the plan at a court hearing last week. None indicated that it was close to becoming a reality.
Since filing for bankruptcy in May,
After Hurricane Katrina destroyed much of the city in 2005, First NBC was a major player in many ambitious construction projects that were financed with federal and state tax credits.
The bank's tax-credit business worked on two levels: First, it would loan money to developers for projects that relied on the tax credits. Then, it would invest in projects that used the credits, including New Market Tax Credits and those for low-income housing or historic rehabilitation.
In turn, the company recorded the credits on its balance sheet as expected cash flow from future tax benefits, essentially profit, and they ultimately accounted for much of its claimed earnings in recent years. But to apply the credits against its taxes, the company needed to earn a profit on which to pay taxes.
Since that wasn't happening, the credits began to pile up. As that figure grew on the company's balance sheet, banking experts noticed something was amiss.
This year, the holding company hired
When it failed in April in a nearly
The
Additionally, federal estimates suggest that First NBC's operating losses for 2017 are expected to exceed
First, the company would have to emerge from bankruptcy and likely move to acquire profitable businesses in order to use the tax benefits.
When it filed for Chapter 11 bankruptcy protection in May, the company's petition listed fewer than 50 creditors owed an estimated
Under the terms of the settlement,
In exchange, the
During a
But not everyone was convinced the plan was a sure thing.
Sternklar described it as "a somewhat very speculative effort to overcome the substantial regulatory and financial hurdles."
In addition to the
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