May Use Cash Collateral Claimed by Creditors : Helionetics Says Court Authorizes It to Operate

Helionetics Inc. said the federal Bankruptcy Court in Santa Ana has approved its application to continue operating and to use the cash collateral that is claimed by its secured creditors.

Costa Mesa-based Downey Savings & Loan Assn., which has about $4.5 million in secured loans to Helionetics, had opposed Helionetics’ petition to continue operating under Chapter 11 of the federal bankruptcy law.

Downey officials were not available for comment Wednesday.

Helionetics said the court’s ruling allows it to proceed with a plan to reorganize under provisions of Chapter 11, which protects a company from creditors while it attempts to work out a plan to pay its bills.

Helionetics, based in Santa Ana, said it expects to present its plan of reorganization to the court on Jan. 9.

Downey had opposed Helionetics’ use of cash collateral in which it and Bank of America have an interest. Bank of America did not oppose Helionetics’ filing.

Helionetics filed for bankruptcy protection in July after failing to negotiate new repayment terms for the overdue $4.5-million loan from Downey. The S&L; had threatened to foreclose on the note on July 31, the day Helionetics filed for Chapter 11 protection.

In its Chapter 11 filing, Helionetics listed assets of $33 million and liabilities of $21.5 million, including a secured $11.5-million note to the Bank of America.