Pacific Capital Funding Group Bankruptcy Case

Pacific Capital Funding Group is in an early-stage, nonoperating Chapter 11 directed toward a liquidation of its mortgage-loan and real-estate portfolio, while its proposed $3 million debtor-in-possession financing faces creditor opposition. The debtors say they intend to pursue a liquidating plan, likely using a liquidation trust to monetize roughly 45 mortgage loans, REO properties and potential litigation claims, while coordinating a forensic review of prepetition conduct and intercompany balances with the creditors' committee, according to the status conference statementDkt. 53.

The company and its affiliates entered Chapter 11 on June 16, 2026, with Pacific Capital's voluntary petitionDkt. 1 commencing the lead case. Their platform originated and serviced private-money mortgage loans through an opco/fundco structure that managed approximately $140 million for about 400 investors across 475 accounts. Major borrower defaults left approximately $42 million of loans nonperforming, while rising rates and contraction in the secondary mortgage market impaired liquidity; distributions and redemptions stopped in late 2025, and all employees had been terminated by February 4, 2026. The first-day declarationDkt. 9 also describes pending civil litigation and investigations by federal and California authorities, including suspension of Pacific Private Money's lending license.

The immediate issue is whether the estates can obtain financing to preserve assets and fund administration pending liquidation. One creditor group argues that the proposed blanket lien and cross-collateralization lack an adequate evidentiary basis, could shift value among 13 estates that have not been substantively consolidated, and should be limited to emergency funding unless the debtors provide estate-by-estate cash, collateral and allocation evidence in the . Additional secured-note creditors similarly seek emergency-only relief pending fuller disclosure concerning prepetition property transfers and collateral value in their . Near-term milestones identified by the debtors are the July 17 status conference, the July 20 creditors' meeting and the July 31 schedules deadline; their stated objective is confirmation of a liquidating plan by year-end, but the financing dispute and planned forensic work remain central to that timetable.

Pacific Capital Funding Group requested authority to borrow up to $3 million from Rubicon Mortgage Fund LLC to finance Chapter 11 administration, protect its assets and pursue a sale process. The proposed facility bears 14% annual interest and carries a $150,000 nonrefundable facility fee, plus $7,500 for due diligence and a $975 documentation fee. It would mature on the earliest of 12 months after the interim closing, 40 days after interim approval without a final order, substantial consummation of a plan or acceleration following default. The DIP financing motion is set for an interim hearing on July 17.

Rubicon would receive first-priority liens on unencumbered assets, junior liens on encumbered assets and superpriority administrative claims, subject to a carve-out; avoidance actions and cash held by Arrival Fund 1, LLC are excluded from collateral. The facility contains no roll-up, but requires rolling 13-week forecasts and variance reporting. Pacific Capital seeks an interim order by July 31 and a final order within 40 days after the interim closing. Those milestones make the July 17 hearing consequential: failure to obtain timely approval would cut off the proposed liquidity needed to operate and run the sale effort.

Pacific Capital Funding Group

Pacific Capital Funding Group

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Pacific Capital seeks $3 million DIP from Rubicon

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