Pacific Capital Funding Group - Chapter 11 Bidding Procedures Summary

Asset Sales Procedures Summary

Overview

• The cases are pending in the U.S. Bankruptcy Court for the Northern District of California, Oakland Division, as Case No. 26-30538 (Pacific Capital Funding Group Inc.), jointly administered with twelve affiliated chapter 11 cases before the Hon. William J. Lafferty.
• The Debtors seek entry of an order under sections 105, 363, and 365 of the Bankruptcy Code, Bankruptcy Rules 2002, 6004, 6006, and 9006, and Bankruptcy Local Rules 6004-1 and 6006-1 approving omnibus procedures (the "Asset Sale Procedures") for the sale of their mortgage and note assets and REO properties, rather than filing an individual sale motion for each asset.
• The relief sought would (i) limit the time and parties to be served with notice of any proposed sale; (ii) establish procedures for parties to object or submit overbids, including credit bids; (iii) authorize sales free and clear of any interest of an entity other than the selling Debtor's estate; and (iv) prescribe procedures for the treatment of unexpired leases on the Properties to be sold where a Debtor is the lessor.
• The procedures are permissive: the Debtors may elect to use them, and retain the option, in their sole discretion, to file individual section 363 sale motions where appropriate for a particular complicated sale. The proposed order likewise authorizes, but does not direct, the Debtors to implement the procedures and permits them to file an individual sale motion for any Property in their business judgment.
• The Motion is supported by the Declaration of William R. Brinkman, the Debtors' Chief Restructuring Officer and the founder and Managing Director of Jigsaw Advisors LLC.

Parties Involved

• Sellers: Pacific Capital Funding Group, Inc.; Pacific Private Money, Inc.; Private Money Management Group LLC; Pacific Mortgage Capital LLC; Pacific Southwest Note Fund LLC; Pacific Private Money Partners LLC; Pacific Private Money Group LLC; Pacific Private Money Fund LLC; Pacific Opportunity Fund LLC; Pacific Note Fund Management Group LLC; Pacific Freedom Fund LLC; Arrival Home Loans, LLC; and Arrival Fund I, LLC.
• Buyers are to be identified in each Sale Notice, together with any known relationship to the Debtors. The Asset Sale Procedures do not apply where the proposed purchaser is an insider of the Debtors.
• Consultation Party: the official committee of unsecured creditors appointed in these chapter 11 cases.
• Debtors' counsel: Jeffer Mangels & Mitchell LLP (Bennett G. Young, Christopher K. Whang, and Melody Mohammadi), San Francisco.

Assets Being Sold

• As of the petition date, the Debtors' principal assets consist of (a) a portfolio of approximately 45 mortgage and note assets held by the Funds (the "Notes"); (b) approximately ten REO properties acquired through foreclosure (together with the Notes, the "Properties"); (c) cash; (d) intercompany receivables; and (e) certain equity interests in affiliated and non-Debtor entities.
• The Properties consist mainly of single-family residences and smaller multi-family properties, together with a single commercial property.
  • Most are located in Northern California, including South San Francisco, Oakland, San Rafael, Castro Valley, Novato, Mendocino, Sebastopol, and Cotati, with others in Waianae, Hawaii; Brownfield, Texas; and Philadelphia, Pennsylvania.
  • A schedule of the Properties, including addresses, property type, owners, and APN, is attached as Exhibit A to the Brinkman Declaration.
• The Properties have not been appraised or valued, though the Debtors believe there is substantial equity in them.

Stalking Horse Bid

• There shall be no stalking horse procedures for the Asset Sales.

Sale Notice

• Prior to any sale for which the Debtors, in consultation with the Consultation Party, elect to seek approval under the Asset Sale Procedures, the Debtors will file a Sale Notice with the Court. A proposed form of Sale Notice is attached to the Motion as Exhibit B.
• For a Note, the Sale Notice must set forth, among other items: a description of the note and mortgage or deed of trust (including the borrower/obligor, the address of the Collateral Property, the original principal amount, accrued unpaid interest, and current unpaid principal balance); the sale price; the current holder(s) of record of the note and the related mortgage or deed of trust; the holders of any liens, participation interests, servicing interests, or other interests, listed immediately below the caption of the Sale Notice in compliance with Bankruptcy Local Rule 6004-1(a); the amount, nature, and proposed treatment of any such known interests, together with the basis for any dispute of them or any other ground asserted for selling free and clear; a summary of marketing efforts supporting commercial reasonableness and the Debtors' business judgment as to price and terms; the proposed Buyer and any known relationship to the Debtors; the section 363(f) provisions authorizing a sale free and clear and a summary of supporting evidence; the identity, date and docket number of the employment order, known connections, and proposed compensation of any Broker, loan sale advisor, or servicer; a schedule of any Servicing Agreements and their proposed treatment, including cure amounts; the current status of the Subject Note (performing or non-performing, payment history and delinquency status, maturity date, and the most recent valuation of the Collateral Property, such as an appraisal or broker price opinion, supporting the proposed sale price); a summary of Closing Costs, including the Broker's or advisor's commission, servicing transfer fees, recording costs for any assignment of the mortgage or deed of trust, and title company fees; estimated net proceeds to the estate after satisfaction of liens and Closing Costs; and the Objection Procedures.
• For Real Property, the Sale Notice must set forth, among other items: the address of the Subject Property; the sale price; the title holder; the holders of any liens or other interests, listed immediately below the caption of the Sale Notice in compliance with Bankruptcy Local Rule 6004-1(a); the amount, nature, and proposed treatment of any such known interests, together with the basis for any dispute of them or any other ground asserted for selling free and clear; a summary of marketing efforts and the basis for the Debtors' business judgment; the proposed Buyer and any known relationship to the Debtors; the applicable section 363(f) provisions and supporting evidence; the identity, date and docket number of the employment order, known connections, and proposed compensation of any Broker; a schedule of any Leases and their proposed treatment, including cure amounts; a summary of the Buyer's adequate assurance evidence; a summary of Closing Costs, including broker's commission, transfer taxes, recording costs, and title company fees; estimated net proceeds; and the Objection Procedures.
• The summaries of evidence required in the Sale Notice — marketing efforts, section 363(f) support, and adequate assurance of future performance under section 365 — will constitute competent and admissible evidence in support of the proposed sale without further foundation, testimony, or documentation, unless timely and properly controverted by an Objection filed prior to the Objection Deadline.

Notice Procedures

• The Sale Notice will be served by mail on (i) the U.S. Trustee; (ii) the Securities and Exchange Commission; (iii) the California Department of Financial Protection and Innovation; (iv) all parties that have filed and served a request for special notice; (v) all parties claiming a lien on the Subject Note or Subject Property, as set forth in the preliminary title report; and (vi) the Official Creditors' Consultation Party (collectively, the "Notice Parties").
• Bankruptcy Rules 2002(a) and (c) otherwise require notice to creditors of a proposed sale, including its terms and the objection deadline, unless the Court orders otherwise. Given the number of Properties, the Debtors submit the proposed limitation on service is reasonably calculated to provide interested parties with timely and proper notice of the sales, the opportunity to object or overbid, and any Sale Hearing, without imposing on the estate the substantial expense of serving every party in interest with notice of each individual sale.
• Notice of the Motion itself was provided to (i) the U.S. Trustee; (ii) the Securities and Exchange Commission; (iii) the California Department of Financial Protection and Innovation; (iv) all parties that have filed and served a request for special notice; and (v) the Official Creditors' Consultation Party. The Debtors submit that, given the nature of the relief requested, no other or further notice is required.

Objection Procedures

• Any objection to a proposed sale or to the assumption of the Leases, or any request for hearing, must be served on Debtors' counsel and filed with the Court no more than 14 calendar days after service of the Sale Notice, unless the Sale Notice specifies a longer period or the Court orders a shorter one.
• If the Objection Deadline passes without an Objection or credit bid, or any such response is withdrawn, the Debtors will file a declaration attesting that no Objection was filed or served on the Debtors (the "Certificate of No Objection") and submit a proposed Asset Sale Order substantially in the form attached to the Sale Notice as Exhibit 1. The Debtors may close the sale upon entry of the Asset Sale Order.

Credit Bid

• Creditors wishing to credit bid for a Subject Note or Subject Property must serve notice on the Debtors and the Consultation Party prior to the Objection Deadline.
• Secured creditors may credit bid up to the amount of their allowed secured claims. The Debtors request that the Court order such credit bids to include a cash payment sufficient to pay all Closing Costs; any creditor successfully credit bidding is responsible for payment of all Closing Costs.
• Where a credit bid is received, the Debtors will set the sale for hearing on no less than 21 days' notice with an opportunity to object.

Overbid

• Overbids may be permitted, provided that each Overbid exceeds the then-current highest and best bid by the greater of 5% of such bid or $10,000 (the "Minimum Overbid Increment").
• Only a Qualified Bidder that has submitted a Qualified Bid may submit an Overbid.
• The Minimum Overbid Increment is intended only to ensure a meaningful, orderly progression of bidding and is not to be construed as limiting or discouraging any larger Overbid. The Debtors may reasonably adjust the increment during the Auction and will determine the highest and best bid after each round.
• The Motion refers to an "Auction" and to "Qualified Bidders" submitting "Qualified Bids" but does not define those terms or establish auction mechanics such as a bid deadline, deposit requirement, or auction date and location.

Determination of Highest and Best Bid

• If two or more Qualified Bidders submit competing bids for the same Subject Note or Subject Property, the Debtors, in consultation with the Consultation Party, will determine in their reasonable business judgment which bid is the highest and best (the "Winning Bid"), considering purchase price, net proceeds to the estate, certainty and timing of closing, and other terms material to the value of the bid.
• That determination is subject to Court approval at the Sale Hearing. Any bidder disputing the determination must raise the dispute by Objection prior to the Objection Deadline or, if raised at an Auction, on the record and by supplemental Objection prior to the Sale Hearing.

Sale Hearing

• If an Objection is filed prior to the Objection Deadline and not withdrawn, the Debtors will set a Sale Hearing on no less than seven days' notice to (i) the Buyer; (ii) any party that filed an Objection; and (iii) the Notice Parties.
• If notice of a credit bid is received prior to the Objection Deadline, the Sale Hearing will be on 21 days' notice to those same parties.

Sale Free and Clear

• Sales under the Asset Sale Procedures will be free and clear of liens and encumbrances to the extent provided under the Bankruptcy Code, with any liens of any kind or nature attaching to the net proceeds of the sale in the order of their priority and with the same validity, force, and effect they had immediately prior to the sale. The Motion more broadly seeks authority to sell free and clear of all liens, claims, encumbrances, and interests, with those interests attaching to the sale proceeds with the same validity, priority, force, and effect they had immediately prior to closing, subject to the rights and defenses of the Debtors and any party in interest.
• Holders of liens, claims, encumbrances, or interests that do not object, or that withdraw an objection, will be deemed to have consented under section 363(f)(2). The Debtors submit that any lienholder that does object will fall within one or more of the other subsections of section 363(f), including that it could be compelled to accept a money satisfaction of its interest under section 363(f)(5).
• The Debtors submit that holders of liens, claims, encumbrances, or interests will be adequately protected by the availability of sale proceeds to satisfy their interests.

Assumption and Assignment

• The Sale Notice will schedule any Leases (for Real Property) or Servicing Agreements (for Notes) associated with the asset, together with their proposed treatment and any cure amounts.
• Section 365(b)(1) requires the Debtors, before assuming a defaulted Lease, to cure the default or provide adequate assurance of a prompt cure, compensate the counterparty for any actual pecuniary loss, and provide adequate assurance of future performance. To the extent any defaults exist under a Lease, the applicable Buyer will cure the default or provide adequate assurance of a prompt cure prior to assumption and assignment. If an Objection is filed, the Debtors will present facts prior to or at the Sale Hearing demonstrating the Buyer's financial credibility and its willingness and ability to perform, satisfying sections 365(b)(1)(C) and 365(f)(2)(B).
• Any Lease counterparty that fails to timely object to the sale or to the assumption and assignment of its Lease is deemed to have consented to the assignment.
• Under the form Asset Sale Order attached to the Sale Notice, the Debtors are authorized to assume the applicable Lease(s) or Servicing Agreement(s) under section 365(a) and to assign them to the Buyer under section 365(f), and pursuant to section 365(k) are relieved of liability for any breach arising after the assignment — both effective upon the closing of the sale.

Closing Costs and Proceeds

• The proposed order authorizes the Debtors to pay directly from escrow the Closing Costs and any outstanding property taxes.
• Under the form Asset Sale Order, the Debtors — and any escrow, upon the Debtors' written instruction — may pay directly from escrow or otherwise (i) all Closing Costs, including compensation of the Broker(s), and for Notes any Loan Sale Advisor(s) and Servicer(s), together with costs of sale and escrow costs; and (ii) for Real Property, any outstanding property taxes, or for Notes, any amounts owing to the current holder(s) of record and any lienholder(s), participant(s), or servicer(s) with an interest in the Subject Note, as set forth in the Sale Notice.

Post-Closing Arrangements

• The Debtors request a waiver of the 14-day stays under Bankruptcy Rules 6004(h) and 6006(d) so that sales may close without unnecessary delay, noting that the Asset Sale Procedures already afford parties in interest notice and an opportunity to object. The proposed order provides that it is effective immediately upon entry and that any such stay is expressly lifted.
• The Debtors are authorized to take such actions and execute such documents as necessary to implement the relief granted, and to make non-substantive changes to the referenced documents without further order of the Court, including corrections of typographical and grammatical errors and conforming changes among the documents prior to distribution. The proposed order also approves the form of Sale Notice attached as Exhibit B to the Motion and the form of Asset Sale Order attached as Exhibit 1 to the Sale Notice.
• The Court retains exclusive jurisdiction over all matters arising from or related to the implementation, interpretation, and enforcement of the order.

Reservation of Rights

• Nothing in the Motion, the Sale Notice, or the proposed order constitutes (i) an admission as to the validity of any claim against the Debtors; (ii) a waiver of the rights of the Debtors or any party in interest to dispute the amount of, basis for, or validity of any claim; (iii) a waiver of any claims or causes of action against any creditor or interest holder; or (iv) an approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy under section 365 other than those identified in the Sale Notice.
• Likewise, any payment made pursuant to the Court's order is not intended as, and should not be construed as, an admission of the validity of any claim or a waiver of the Debtors' right to dispute that claim later.

Background

• The Debtors originated and serviced "hard money" mortgage loans, raising capital from private investors and lending those funds to developers and other parties on a basis secured by liens against real estate. They operated through an "opco/fundco" structure, with PPMI serving as the licensed operating entity that originated and serviced the loans.
• Capital was raised through a series of open-ended investment funds, with approximately 400 individual investors holding roughly 475 accounts and total invested capital of approximately $140 million. PPMI originated loans using capital from the fundcos, private individual "Trustee Investors," and debt facilities.
• A significant portion of the fundcos' loan portfolios became non-performing following defaults by several major borrowers, including approximately $10 million in loans to a borrower who died leaving undeveloped land or partially completed construction as collateral, more than $20 million in non-performing loans and accrued interest from another borrower, and approximately $12 million from a third. The pool of loans available to foreclose on dwindled over time, and a number of remaining loans became under-secured or unsecured as the underlying property was lost to senior lienholders. A sharp rise in market interest rates further contracted the secondary market for the Debtors' mortgage loans, eliminating a key source of liquidity.
• By 2023, redemption requests across the Funds exceeded available cash. In 2025, the Debtors' cash position became extremely stressed, prompting staff reductions, salary cuts, and elimination of discretionary expenses. In late 2025, the Debtors ceased distributions and redemptions and engaged Brinkman as CRO to evaluate strategic alternatives, which ultimately led to chapter 11.

Need for the Procedures

• Filing and noticing a separate sale motion for each Property would be unduly burdensome, generating professional fees, consuming management's time and attention, taxing the Consultation Party, the U.S. Trustee, and other parties in interest, and straining the Court's resources.
• The Debtors' principal concern is bid chilling: absent these procedures, parties otherwise interested in purchasing one or more Properties may decline to participate in a bankruptcy sale process. Sales of the single-family residences could be severely impacted, as potential buyers may not be sophisticated in real estate transactions, let alone bankruptcy sales, and imposing a hearing requirement is likely to depress prices.
• The Debtors developed the Asset Sale Procedures with their professionals and the Consultation Party, and submit that the procedures will test value through both the traditional real estate market and the opportunity to overbid or credit bid prior to or during the applicable objection period, while remaining within the Debtors' sound business judgment.

Key Dates

• Motion Filed: Aug. 5, 2026
• Hearing on the Motion: Aug. 26, 2026, at 10 a.m., Courtroom 220, before the Hon. William J. Lafferty
• Objection Deadline (per sale): 14 calendar days after service of the applicable Sale Notice, unless the Sale Notice specifies a longer period or the Court orders a shorter one
• Sale Hearing (if an Objection is filed): on no less than seven days' notice
• Sale Hearing (if a credit bid is received): on no less than 21 days' notice