Barclay's Bank has agreed to hold off on a court hearing seeking to force an auction of all the assets of LandSource while it negotiates with the operators of the giant land development now under Chapter 11 bankruptcy court protection to develop a plan to reorganize the company.

"There is a consensual plan not to schedule a hearing," to immediately liquidate the company's assets, said Debra Dandeneau, a partner at Weil, Gotshal & Manges, the firm representing California-based LandSource in the bankruptcy filing.

The parties appeared to be at an impasse when Barclays asked the court on Oct. 13 to auction off the company's assets, the largest of which is Newhall Land and Farming in the Santa Clarita valley just outside Los Angeles.

The bank, which represents a consortium of investors that financed the purchase of LandSource in early 2007, said it was proposing the liquidation of the company's assets since LandSource had failed to come up with one of its own within the time frame it was allowed to exclusively present a plan to reorganize itself after filing for bankruptcy in June.

LandSource representatives said it had presented two plans to Barclays. Barclays said in court documents they weren't detailed enough to count.

Liquidating the company's resources piecemeal at auction and shutting down the company that currently manages it would lower the value of LandSource's Newhall assets because a good deal of its worth lies in its size and cohesiveness as a master planned community, Dandeneau said.

"It's been an educational process" of the creditors, she said. "I think that people are beginning to understand more and more the nature of the assets and the importance of Newhall as an ongoing business." She added, "You are not going to break up Newhall and sell a piece of land here and there."

That's not to say that there won't be new owners brought in at some point to inject capital, said Dandeneau. "It could very well be at the end of the day that we have new investors who come in and own Newhal." She continued, "That's a sale too. But that's not what I think of as a liquidation."

LandSource, which has land in Florida, Arizona, New Jersey, and Nevada, was once, not so long ago, flying high. When Lennar and LNR Property sold the majority of their interests in the company to a partnership formed by MacFarlane Partners, CalPERS and Weyerhaeuser Real estate in February 2007, it was appraised at $2.6 billion. Within a year, its value had dropped to $1.8 billion, triggering violations of the company's loan covenants. No doubt, the value has fallen further since.

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