Continental Coin plan offers slim chance to recover money

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The Rochester-Genesee Regional Transportation Authority sees recovery of the $1 million in bus fares it lost to Continental Coin Processors Inc. in the firm’s proposed Chapter 11 reorganization as facing very long odds.
But at least it does not risk losing more under the plan, said Joseph Yanni, RGRTA chief financial officer.
As head of the creditors committee in the bankruptcy proceedings, RGRTA this week gave the green light for presentation of Continental Coin’s reorganization plan to all creditors.
The plan is expected to go to creditors in February. If approved, the plan will give creditors stock in a newly formed company as payment for their debt.
Yanni would prefer to see Continental Coin liquidated, he told the Rochester Business Journal recently. But since that would guarantee RGRTA would see nothing out of the bankruptcy, the authority probably will go along with the reorganization plan.
Buffalo-based Continental Coin filed for protection from creditors in June, stating more than $4 million in debt.
The firm was supposed to have processed coins for RGRTA and a number of other customers, and deposited money in customer accounts. Company officials say the missing sums simply were eaten up by operating costs.
The $1 million in missing RGRTA bus-fare money is Continental Coin’s single largest debt. But others on its client list–includng Tops Markets Inc. and Rochester Telephone Corp.–lost six-figure sums.
Under the reorganization plan, each of its creditors would get one share of preferred stock in a firm called Coin Management Ltd. for each dollar of debt.
At this time, any number of shares of CML stock and 65 cents will buy creditors a cup of coffee. Their only hope of seeing any cash is helping CML to successfully make a market for its shares.
A disclosure statement filed by Continental Coin with the U.S. Bankruptcy Court promises big things for the new company. However, it also concedes a number of hurdles must be cleared.
The firm’s biggest upside, the statement suggests, is a wide potential market for automatic coin-processing service in Upstate New York.
On the other hand, the statement acknowledges, no systematic study backs the claim. Further, it adds, the business is easy to enter, and the field is rife with larger, better-capitalized competitors.
Continental Coin, meanwhile, is running at a loss, operating statements filed with the Bankruptcy Court show.
To make the plan work, the disclosure statement notes, CML must line up additional financing from lenders and from a private stock offering.
“The failure of the company to obtain additional capital, or any at all, may significantly restrict (its) operations,” the document states.
For the private-placement offering, CML– taking Continental Coin’s finances into account–has set an arbitrary value of 40 cents a share for CML common stock. It plans to offer 250,000 shares. How different the company would be under CML is not clear.
In the plan CML is described as an equity investor, 20 percent or more of which is owned by Continental Coin’s “indirect” owners.
Its principal owner is a Rochesterian named Morris Diamond, described by Continental Coin as an individual involved since 1970 in rescuing distressed companies.
The firm will have two officers: Secretary Susan Luxenberg, who is Diamond’s daughter, and Martin Osber, president and treasurer.
According to the disclosure, Osber is a business and financial consultant who previously was president of Gersh Electrical Supplies Inc. of Geneva.
Luxenberg is a consultant to a Rochester firm called MS Acquisitions Corp. and previously was president of a local construction company, Taggert Development Corp.
Continental Coin would function as a CML subsidiary with day-to-day operations in the hands of current President Bruce Stenzel, said Continental Coin bankruptcy attorney David MacKnight of Lacy, Katzen, Ryen & Mittleman LLP.
A founder of the firm, Stenzel was at Continental Coin’s helm when it sailed into its present straits.
Amid these questions is one certainty: RGRTA and other creditors will get nothing if they reject the proposed reorganization.
In a liquidation, the disclosure statement warns, Continental Coin would realize $125,000–an amount insufficient to pay RGRTA and other unsecured creditors a single cent.