Related articles:

Mortgage lender First Magnus files bankruptcy plan First Magnus to ask court to let it send its Ch. 11 plan to creditors Creditors have until Dec. 3 to file claims against First MagnusFirst Magnus Capital wants outEx-First Magnus workers struggle to find equal payFirst Magnus went first-class, leasing a 'very loaded' Jaguar1st Magnus sets payment timeline Magnus queried over pay to execs Magnus manager sues to seek profit

Other articles by Christie Smythe:

Christie Smythe: Former 'Ugly house' franchise settles suitTucson firm accused of 'deceptive tactics' in foreclosure rescuesLocal builder Pathway files for Chapter 7 bankruptcyTucson's Pathway Developments files for bankruptcy liquidationArizona mortgage failures fuel crisisShovels poised at South Side shopping centerReal Estate by Christie Smythe: Housing slide cuts antique door salesTucson office market in cooldownTucson's median home price plunges by 7.5 percentPhoenix-area lender to add Tucson firm

Health Care
Sierra Tucson
Eating Disorders Program Coordinator Trades/Construction
RANCHO RESORT
MAINTANANCE POSITION General
A1 Communications
Cable Techs

Tucson-based mortgage lender First Magnus Financial Corp. says it can pay wages to employees laid off before the company filed for bankruptcy, according to a plan filed with the court Tuesday.

But other unsecured creditors could end up with pennies on the dollar under the plan.

The plan, which explains how First Magnus intends to settle its debts, says the company will be able to pay about $11.5 million in unpaid wages and $903,000 in medical expenses owed to the roughly 5,500 employees nationwide laid off Aug. 16.

Still, it could take months for the plan to be approved and payments to be made.

The company filed for Chapter 11 bankruptcy, with intent to liquidate itself, on Aug. 21. First Magnus, at the time Tucson's only locally based firm with a national presence, employed roughly 800 workers here.

Vendors, landlords and other unsecured creditors will likely fare worse. The company estimates it will only have $16 million to $32 million to cover at least $80 million in other claims.

Some of those claims come from local firms that did business with First Magnus. A local Allegra Print & Imaging office, for example, still has a substantial amount of material ordered by First Magnus that has not been paid for, said attorney Scott Gibson.

The $80 million pool of claims also includes more than $1 million in additional worker pay and $35 million owed to First Magnus holding company First Magnus Capital Inc., according to the plan.

Unpaid employees have priority over other unsecured creditors in bankruptcy cases, but only up to $10,000 each.

Tucson bankruptcy attorney Matthew R.K. Waterman, who is representing unsecured creditor National Bank of Arizona, said it is too soon to tell how much money will actually be available for unsecured creditors because the company is still determining how much it owes.

Funds available to pay unsecured debt will be shared among the creditors, according to the plan.

As a "ballpark figure," Waterman said he expects creditors to receive around 20 cents on the dollar.

"I wouldn't be surprised if it's substantially less than that," he said.

The wild card will likely be the amount owed to landlords and other holders of contracts rejected by First Magnus, which are not fully accounted for in financial information filed with the court, Waterman said.

Secured creditors who loaned money to First Magnus to make mortgage loans might also join the ranks of unsecured creditors if selling the loans doesn't earn enough to repay their debts, he said.

The process required to approve the plan to pay creditors might take anywhere from 90 days to more than seven months, said Marcia Busching, a former Phoenix bankruptcy attorney not involved in the case.

Creditors must first vote to approve the plan. If some creditors do not approve the plan, hearings might be held to determine whether it is fair, Busching said.

First Magnus reported having assets of $1.87 billion and $1.65 billion in liabilities, according to documents filed with the court. About $1.1 billion in liabilities has been wiped off the company's slate by Washington Mutual, which agreed to take back possession of loans First Magnus made with its funds.