There's been a new plan filed to reorganize and pull LandSource Communities out of bankruptcy debt free, and essentially it's the same as one before, only more detailed.
The company's creditors, a consortium of investors managed by Barclays that is owed roughly $1 billion, would still end up with 85% of the new company formed after bankruptcy if the plan is approved by the court.
Lennar, which now owns 16% of LandSource, would still spend $140 million for 15 percent of the new entity, title to some of the company's land assets, and release from some potential legal claims.
And, to raise another $140 million it will take to keep the company going, there would be a rights offering. But the new plan allows not only the senior secured creditors to buy those rights but other major creditors to reinvest as well, said Debra Dandeneau, a partner at Weil, Gotshal & Manges, the firm representing LandSource in the case.
The plan also now specifically says which investors have agreed to pony up for whatever portion of the $140 million isn't raised in the rights offering: Anchorage Advisors, Marathon Asset Management, Affiliate Investment Funds of OZ Management, Third Avenue Real Estate Value Fund, Third Avenue Special Situations Fund (Master), TPG Credit Management, or any one they permit to invest.
"There were complaints that there was not a lot of information about how it's going to work," said Dandeneau. "I think this answers those questions."
The $240 total raised from Lennar and the rights offering would pay off the loan made by Barclays to keep the company operating in bankruptcy, professional fees in the case, property taxes, and liens, as well as give the reorganized company, called Holdco, working capital of about $122.5 million.
The new plan also gives unsecured creditors called a "convenience class" more defined payments. Unsecured claims of $10,000 or less would get $0.50 on the dollar, and those owed $50,000 or less are allowed to get $0.50 per dollar for whatever they are owed that is $10,000 or less.
Some other details offered up in the bankruptcy document include those related to the management of the new company. Lennar would manage Holdco through a company run by Emile Haddad, chief architect of the original LandSource company for Lennar. Haddad will put $1 million of his own money into Holdco as a requirement. He'll receive some ownership in the new company in return. The management company itself will have 2.5% interest in the new company and receive a $5 million annual fee.
The court documents also include some details about the reorganized company's business plan. At the end of 2008, LandSource owned more than 50 communities with more than 34,000 home sites, 800 acres of commercial land, and 4 million square feet of commercial redevelopment.
The plan would focus on preserving and securing entitlements on the company's best asset, Newhall Ranch and Valencia, huge developments in the Santa Clarita Valley 30 miles north of Los Angeles. The company owns 31,000 acres of entitled and untitled land there.
Most of the remaining company's assets, roughly 3,928 lots scattered will be mothballed and sold when possible. Already the company has made a deal to sell much of its land in the ailing Inland Empire area of Riverside, Calif. Dandeneau said deals are pending to sell assets in Nevada as well.
A hearing on the proposed plan is scheduled to go before Bankrupty Court Judge Kevin Carey on May 20. If he approves, it will be sent to stakeholders for a vote. Even if a majority of creditors fail to approve it, Barclays has said it plans to ask the judge to approve the agreement any way under a cramdown provision.
Dandeneau said she expects there will be some objections filed.
"But we are keeping our fingers crossed," she said. "We've got a tough road ahead."
Learn more about markets featured in this article: Los Angeles, CA.