Del Ray II - Chapter 11 Case Summary
Del Ray II has filed for Chapter 11 bankruptcy to address a liquidity shortfall threatening operations at its 114-site manufactured housing community in Longview, Washington, seeking to reorganize approximately $13 million in secured mortgage debt held by KeyBank, backed by an equity cushion in the property appraised at $21.8 million and interim use of cash collateral.
Business Description
Del Ray II LLC ("Debtor") is the owner of a manufactured housing community comprising 114 homesites on a 15.77-acre site located at 5600 Mt. Solo Road in Longview, Washington. The Property also includes RV storage amenities.
- As of May 11, 2022, the Property had an appraised value of $21,800,000.
Operations Overview
Utility Services
In connection with the operation of its business, the Debtor obtains electric, water and sewer, and garbage removal services from several utility companies. The Debtor's tenants possess and pay for their own individual electricity accounts.
- Water, sewer, storm sewer, and garbage services are obtained from the City of Longview, which are submetered to tenants through a third-party utility billing services provider. The submetered amounts are listed on tenants' monthly rent bills, with the Debtor functioning as a pass-through entity.
- The Debtor maintains its own electric account with Public Utility District No. 1 of Cowlitz County, limited to powering lights around the mailbox area and a modem used for submetering water and sewer service. The Debtor does not maintain an office or any other buildings at the Property that require utility services.
Uninterrupted utility services are critical to the Debtor's ongoing operations. As adequate assurance of payment, the Debtor has proposed a cash deposit upon request equal to one month of average service for each utility.
Workforce and Payroll
The Debtor's employees receive payroll on a bi-weekly basis, one week in arrears. Payroll is funded on Wednesdays to a third-party payroll manager, which then distributes payments to employees on Fridays via electronic transfer.
- Each payroll cycle is approximately $8,775 per pay period.
- The Debtor last made payroll on Friday, February 27, 2026, covering the period through the Petition Date.
Prepetition Obligations
Secured Debt
- The Debtor's secured creditor is Wilmington Trust, National Association, as Trustee for the benefit of the registered holders of Bank 2022-BNK44, Commercial Mortgage Pass-Through Certificates, Series 2022-BNK44, of which KeyBank National Association (together, "KeyBank") is the current mortgage servicer for the Deed of Trust.
- Pursuant to the loan and security agreement, KeyBank asserts it holds a perfected security interest and lien in the Property, including a perfected lien and security interest on any and all rents received by the Debtor.
- As of the Petition Date, the Debtor's obligations to KeyBank totaled approximately $13,000,000 in principal, plus interest, fees, and costs to which KeyBank is entitled under the loan documents and applicable law.
Events Leading to Bankruptcy
Chapter 11 Filing and Cash Collateral Needs
On March 25, 2026, the Debtor filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code in the U.S. Bankruptcy Court for the Western District of Washington (Tacoma Division).
- To preserve and maintain the value of the assets of its estate, the Debtor requires cash for the payment of operating expenses, taxes, insurance, and payroll. The Debtor has prepared an operating budget, a copy of which is attached to the proposed cash collateral order.
- Without the use of KeyBank's cash collateral, the Debtor is without sufficient funds to pay payroll and support its Chapter 11 reorganization. Absent such authorization, the Debtor would be forced to cease operating, causing potential violations of Washington landlord-tenant law.
As adequate protection for the use of cash collateral, KeyBank is protected by an equity cushion in the Property and replacement adequate protection collateral. The Debtor will also maintain and manage the Property, pay taxes and insurance, and protect the Property from diminution in value from and after the Petition Date.
- The Debtor's employees are vital to its reorganization efforts and provide essential services without which the Debtor would be unable to function. A failure to honor ongoing wage obligations would significantly impair worker morale and the Debtor's ability to continue operations.
- The Debtor has requested an interim hearing on April 7, 2026, on its Motion for Interim and Final Authority to Use Cash Collateral.