LandSource Communities Development is asking a bankruptcy court judge to allow it to sell off land through a streamlined approval process in order to generate cash more quickly.

While the California-based developer, which filed for Chapter 11 bankruptcy court protection last July, has no plans to sell off its most valuable asset, Newhall Land and Farming, a huge chunk of land in the Santa Clarita Valley just outside of Los Angeles, it is trying to liquidate holdings in other states such as Nevada and Texas, said attorney Debra Dandeneau, a partner with Weil, Gotschal & Manges, which represents LandSource.

It could take four months or longer to take land through the auction sale process and the various court approvals required under standard bankruptcy court procedures.

"Because we have several different properties that we are marketing, we don't want to keep running to the court," Dandeneau said. Plus, in today's market, with land prices volatile, such a lag time could jeopardize sales. "Nobody wants to be locked in for that long a period of time," she said.

So LandSource is attempting to shorten the timeframe by asking the court to waive the requirement of court approval to make a deal with a "stalking horse," a bidder who agrees to make the first bid on property in exchange for an agreed upon "breaking up" fee that the bidder would receive if the land is ultimately sold to another bidder.

Depending on hearing timing, that could shorten the process to two months, Dandeneau said, adding that there have been no objections to the motion filed thus far. The hearing is scheduled for Dec. 9.

It's likely that the company's creditors would be happy to get some of the company's assets converted into cash. Barclays, which represents a consortium of investors that financed the purchase of LandSource in 2007, earlier made a motion asking the judge to insist that all the company's assets, including Newhall, be auctioned off as soon as possible and the proceeds distributed among the creditors. Barclays representatives said they were frustrated with LandSource's failure to file a complete plan for reorganizing its operations. Later, Barclays agreed to hold off on that motion for the time being.

Dandeneau said Barclays now seems to understand that liquidating the company's main Newhall asset piecemeal at auction and shutting down the company that currently manages it would lower the value of LandSource's Newhall because a good deal of its worth lies in its size and cohesiveness as a master planned community.

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 Newhall," she said. "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 owned by Lennar and LNR Property. They sold the majority of their interests in the company to a partnership formed by MacFarlane Partners, CalPERS, and Weyerhaeuser Real Estate in February 2007. At the time it appraised at $2.6 billion. Within a year, its value had eroded significantly to $1.8 billion, triggering violations of the company's loan covenants, and sending the company into bankruptcy filing last summer.

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