Mercedes Homes announced Friday that it has struck a deal with its creditors and hopes to emerge from Chapter 11 bankruptcy by the end of September, eight months after filing for court protection.
If successful, Mercedes would be one of the first of its size to get out of Chapter 11 as a going concern. The Melbourne, Fla.-based builder said it plans to continue building homes if its reorganization plan, which was filed on July 10, is approved.
Mercedes said in a news release Friday that the plan has the support of its secured creditors, banks, and the committee representing its unsecured creditors. Objectors to the plan will be able to lodge their complaints before a bankruptcy court judge rules on it. (Mercedes filed in U.S. Bankruptcy Court, Southern District of Florida.)
Under the proposed reorganization plan, one creditor would forgive all of Mercedes' debt in exchange for all the stock in the new company. The other creditor would agree to rewrite the terms on its loans to Mercedes while keeping its liens on the company's assets.
The plan would void all the company’s current common stock, which is held in an employee stock ownership plan (ESOP), and issue new stock to the Buescher family-controlled Real Estate Investment Ventures, which is owed about $68.5 million in principal and $2.1 million in interest. The debt to the company is secured by the company’s assets.
The company’s other big creditor, the lenders on its revolver, would issue new loans to cover 90% of the $140 million they are owed.
The $1-million-plus of taxes the company owes would be paid in full. Priority unsecured claims of $765,646 would also be paid in full. General unsecured claims would get between 12% and 15% of the $40- to $50-million they are owed.
The company’s Space Coast Truss company, which is in debt for $567,000, would be sold and the proceeds given to its lien holders.
Teresa Burney is a senior editor at Big Builder and BUILDER magazines.