The interim managers at USA Capital, a bankrupt private lender that holds $962 million in assets for several thousand investors, has reached a tentative agreement to sell the assets of one of two funds to Silver Point Capital of Greenwich, Conn., an attorney said Wednesday.

Annette Jarvis, an attorney for the company, told Bankruptcy Judge Linda Riegle that the deal also provides for Silver Point to serve as the loan servicer for USA Capital.

The terms of the agreement were not disclosed, but investors in USA Capital First Trust Deed Fund would receive a payment for their share of the payment made by Silver Point. The fund has about 900 separate investor accounts and $64 million in assets.

Proceeds from the proposed sale are not expected for two or three months, and the deal requires Riegle's approval. Investors in the First Trust Deed Fund might recover additional payments from assets that the estate recovers for creditors.

In addition, First Trust Deed investors received $1.2 million in the first interim distribution of funds to investors, and they will recover an additional amount from a second partial distribution approved Wednesday.

The management of USA Capital expects to pay out more than $10 million to investors, including those who held fractional interests directly in short-term mortgages or so-called trust deeds. Checks from that distribution are expected to go out the first week in October, said Mark Olson, chief operating officer at USA Capital.

USA Capital solicited funds from investors for two funds and for fractional interests in loans that were made to developers, providing real estate as collateral. It was paying monthly checks to investors, however, on numerous loans on which interest payments were past due, and it filed for bankruptcy protection April 13.

At the hearing Wednesday, the judge rejected the arguments of August Landis, assistant U.S. trustee, and gave USA Capital exclusive rights to file a plan of reorganization giving the debtor companies until Oct. 19 to negotiate. The bankrupt company wants more time to negotiate with creditor committees before other parties are allowed to file competing plans of reorganization.

The decision relies on all four committees supporting extension of the exclusivity period for filing a plan.

Riegle said she was concerned various parties would file competing plans of organization that would require extensive hearings and additional legal expenses. The judge said that may be avoided by allowing the management team to keep the proposed plan secret for negotiations with creditor committees.

Landis said investors should be allowed to see the plan so that they know what USA Capital's interim managers are proposing.

"Let's let in a little sunshine," Landis said. "What moves a case forward is having the debtors go ahead and play their cards now" by filing a public copy of the plan of reorganization, Landis said.

Riegle complained that the U.S. Trustee's office, which serves as a watchdog for the public in bankruptcy cases, has allowed numerous bankruptcy cases to languish with no plan of reorganization. Landis said he has been in his position for only 14 months and should not be held responsible for others' previous actions.

The judge interrupted Landis repeatedly to question his arguments that USA Capital file a plan of reorganization on Friday. She also denied his backup argument that she set a firm date beyond which no extensions would be allowed.

Frank Merola, an attorney representing the committee for First Trust Deed investors, supported the extension of exclusivity, saying professionals still do not know how much of the $962 million in assets will be recovered. "We're still asking how big is the hole," Merola said.

Riegle asked Robert LePome, an attorney representing investors, about concerns that USA Capital's previous managers diverted mortgage loan principal payoffs from the lenders. LePome, who also favored an end to exclusivity for the debtor, counted five loans for a total of $48 million that were paid off but not returned to investors. LePome noted that the former owners of USA Capital have provided $58 million in assets for the benefit of creditors and investors so "they will not be left out in the cold."

Separately, Riegle urged investors not to send her letters complaining about the bankruptcy case. She urged attorneys to set up a procedure so that investors can come before her in open court and explain their issues if they are unable to resolve disputes with the interim managers of USA Capital.