SilverRock Development Company, LLC and five affiliated entities filed a disclosure statement on December 1, 2025, outlining a Chapter 11 liquidation plan that would establish a litigation trust to wind down operations and distribute proceeds to creditors following the $65 million sale of their resort development project in La Quinta, California. The filing in the U.S. Bankruptcy Court for the District of Delaware provides details on the bankruptcy cases of the companies behind a large-scale mixed-use development that experienced financial difficulties after their construction lender abruptly discontinued funding during the COVID-19 pandemic.
The debtors, which filed for bankruptcy protection on August 5, 2024, successfully sold substantially all of their assets to Turnbridge through a court-supervised auction process in October 2025. The proposed plan calls for creation of a litigation trust that would receive all remaining assets, pursue outstanding legal claims, resolve disputed creditor claims, and make distributions according to the bankruptcy priority scheme.
Background of the Development Project
The SilverRock entities were involved in developing a large-scale resort and mixed-use real estate project beginning in 2014 after entering into purchase, sale, and development agreements with the City of La Quinta. The project was designed to include two hotels, branded residences with Montage International, a conference center, a golf course and clubhouse, a mixed-use promenade village, and substantial public infrastructure improvements.
Initially managed by the Robert Green Company, the corporate structure comprised six debtor entities: SilverRock Development Company, SilverRock Phase I, SilverRock Lodging, SilverRock Lifestyle Residences, SilverRock Luxury Residences, and RGC PA 789.
Financial Collapse and Path to Bankruptcy
The project's financial difficulties stem primarily from a 2019 construction loan arrangement with Mosaic Real Estate Investors. The debtors obtained a $212.5 million construction loan from Mosaic to fund infrastructure and commercial components, along with a $179 million commitment for branded residential components. The financing was intended to provide sufficient capital for the debtors to achieve required milestones under their development agreement with the City of La Quinta.
However, in early 2020, upon the onset of the COVID-19 pandemic, Mosaic abruptly discontinued all funding to the debtors after advancing only approximately $36 million of the committed loan proceeds.
In October 2021, the debtors attempted to salvage the development by retiring Mosaic's loan balance and obtaining a $40 million bridge loan from Poppy Bank, secured by a first-position deed of trust covering several parcels of real property. As of the petition date, this loan had an alleged outstanding balance of $32 million.
The lasting impacts of the pandemic on the hospitality industry and capital markets continued to affect the project. In the two years preceding bankruptcy, the construction industry faced steep interest rate increases, severe construction cost escalations, soaring insurance premiums, and increasing utility and labor costs, all of which compounded the debtors' financing challenges.
By summer 2024, the debtors were over-leveraged, undercapitalized, and facing foreclosure actions from multiple secured creditors, including Poppy Bank and Cypress Point Holdings. Additionally, the City of La Quinta had declared the debtors in breach of the development agreement.
A restructuring attempt involved converting preferred equity holders and unsecured creditors into secured creditors in July 2024. However, when a proposed new investor failed to raise sufficient capital by a July 31, 2024 deadline, the City issued a notice on August 1, 2024, purporting to terminate all of the debtors' development rights under the purchase and sale agreement. With Poppy Bank and Cypress Point both having issued notices of default and trustee sale, the debtors filed for Chapter 11 protection on August 5, 2024.
Chapter 11 Proceedings and Asset Sale
Following the bankruptcy filing, the debtors appointed Douglas Wilson as Chief Restructuring Officer and later appointed Christopher S. Sontchi as Independent Manager to oversee the cases. The debtors obtained debtor-in-possession financing from the City of La Quinta in an aggregate principal amount not to exceed $11 million, initially on a non-priming basis and later on a priming basis.
With the DIP financing stabilizing operations, the debtors conducted a court-approved sale process with Jones Lang LaSalle serving as their real estate broker. After a robust marketing process and auction, the debtors selected Turnbridge as the successful bidder with a $65 million cash purchase price.
Numerous parties, including Builders Capital, Poppy Bank, Cypress Point, and certain EB-5 lenders, objected to approval of the sale. The court held a contested four-day hearing in mid-October 2025, during which it heard presentations of evidence and witnesses. On October 21, 2025, the court made an oral ruling finding that the debtors met their burden under section 363(b) of the Bankruptcy Code and were authorized to sell the assets free and clear of all liens, claims, interests, and encumbrances. The court entered a formal sale order on October 23, 2025.
Builders Capital filed an appeal of the sale order, but its motion for a stay pending appeal was denied. To facilitate completion of the sale and orderly wind-down of the estates, the City of La Quinta agreed to provide accommodations including subordination of $2.25 million of the DIP facility and up to $2 million in additional financing.
Proposed Plan Structure and Creditor Treatment
The liquidation plan proposes substantive consolidation of the six debtor entities' estates, recognizing that the debtors operated as an integrated business organization and their primary asset was a partially constructed piece of real property that was marketed and sold as a whole.
Under the plan, claims and interests are classified into 19 classes. Administrative claims, DIP claims, professional fee claims, and priority tax claims are unclassified and will be paid in full. Secured tax claims and priority non-tax claims are unimpaired and will receive full payment.
The secured creditor classes, ranging from Class 3 through Class 15, are impaired but most are projected to receive 100 percent recovery based on the value of their collateral as determined through court-approved allocation proceedings. The Keillor secured claim is estimated to receive 93 percent recovery.
General unsecured creditors in Class 16 are impaired and will receive beneficial interests in the litigation trust rather than direct cash distributions. Their ultimate recovery percentage is listed as "to be determined" and will depend on the litigation trust's success in pursuing retained causes of action, resolving disputed claims, and managing administrative expenses.
Subordinated claims, intercompany claims, and equity interests in Classes 17 through 19 will receive no distribution and are deemed to reject the plan.
Litigation Trust Mechanism
Central to the plan is establishment of a litigation trust to be funded with all remaining assets of the debtors. A litigation trustee will be appointed to administer the trust with oversight from a litigation trust oversight committee. The trustee will be responsible for liquidating trust assets, resolving all disputed claims, making distributions to holders of allowed claims according to the plan's priority scheme, and pursuing retained causes of action.
The plan preserves all causes of action not expressly waived or released, transferring them to the litigation trust. This includes potential avoidance actions and other claims that may generate recoveries for creditors.
Releases and Exculpation Provisions
The plan includes release provisions for certain parties involved in the bankruptcy cases. The debtors will release "Released Parties" from claims relating to the debtors' affairs. The plan also includes third-party releases by holders of claims who vote to accept the plan and do not opt out of the releases.
Additionally, the plan provides for exculpation of certain parties for acts taken on or after the petition date in connection with the bankruptcy cases, and includes an injunction against actions inconsistent with the plan's terms.
Converted Secured Creditors Controversy
A notable aspect of the cases involves the July 2024 pre-bankruptcy transaction in which preferred equity holders and multiple unsecured creditors were converted into secured creditors. The disclosure statement indicates that all of these converted secured creditors, with the exception of Richard and Lehn Goetz and Axia Talus, have agreed to unwind their security interests and return to their prepetition positions as preferred membership interest holders.
The City of La Quinta sued the debtors and the converted secured creditors on July 24, 2024, alleging fraudulent conduct and breaches under a memorandum of understanding and the purchase and sale agreement.
Court Proceedings and Next Steps
The debtors recommend that all eligible creditors vote to accept the plan. The disclosure statement must be approved by the court before the debtors can solicit votes on the plan. Following disclosure statement approval, the court will schedule a confirmation hearing to determine whether the plan satisfies the requirements of section 1129 of the Bankruptcy Code.
For the plan to be confirmed, at least one impaired class of claims must vote to accept it. The debtors and the City of La Quinta, in its capacity as DIP lender, support the plan.
The disclosure statement was filed as docket number 824 in the bankruptcy cases pending in the U.S. Bankruptcy Court for the District of Delaware under case number 24-11647 (MFW). The debtors are represented by Wilson Sonsini Goodrich & Rosati, P.C. and the Law Offices of Benjamin M. Carson, P.C. as co-counsel. Richards, Layton & Finger, P.A. serves as counsel to the Independent Manager.
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