By month's end, another major home builder could be out of Chapter 11 bankruptcy.
On Oct. 30, there is a hearing scheduled in California bankruptcy court to confirm the reorganization plan of Woodside Group, the Utah-based home builder and developer that petitioned the court for protection from its creditors in September 2008.
This would be the third hearing this month to confirm a plan that involves Woodside and 185 of its subsidiaries, which had $1 billion in consolidated assets and $1.5 billion in liabilities when they filed for Chapter 11 protection. Two other subsidiaries—known as Alameda and Liberty—filed separately last January and February. They will liquidate their assets as part of Woodside’s plan.
Woodside was forced into bankruptcy by its lenders and bondholders, led by JPMorgan Chase, and those creditors will end up owning the lion’s share of the reorganized company, according to a disclosure statement detailing Woodside’s plan, which it submitted to the U.S. Bankruptcy Court in Riverside, Calif.
The plan calls for Woodside’s debt and equity to be issued to a new limited liability company (called “Newco” in the documents). Three classes of creditors—financial lenders, with total claims of $717 million; bondholders, which are owed $48.6 million; and unsecured creditors, owed $176 million—will receive allocations of that debt and equity, which is secured by Woodside’s assets. These allocations will be distributed proportionally to the claims owed.
Bondholders could choose to receive a payout instead, which would be determined by the bankruptcy court. And administrative claims totaling $29 million will be paid in full.
The restructured debt and equity will be issued to creditors by Woodside’s reorganized financial subsidiary, Pleasant Hill Investments. That distribution will be funded from cash on hand and the sale of assets and homes. The plan also gives the reorganized Woodside a $165 million claim against Alameda's assets. However, the reorganized builder could require an injection of new capital from lenders, according to the disclosure statement.
Woodside’s operations reported $655 million in revenue in 2008, when it had about $94 million in cash. As of Dec. 31, 2008, the company had 383 employees (plus 64 associated with Alameda and Liberty), and 658 contracts to build. It had 56 development projects in California, 22 in Nevada, 19 in Florida, 15 in Texas, 13 in Utah, 12 in Minnesota, and seven in Washington, D.C.
The current status of those projects could not be determined, but Woodside’s Website indicates that it has homes for sale in eight communities in Sacramento, 10 in Fresno and 14 in Southern California; eight in Phoenix and Tempe, Ariz.; 12 in Las Vegas; nine in Utah; eight in San Antonio, Texas; five in Washington, D.C.; six in Minneapolis and St. Paul; nine in Jacksonville, three in Daytona, one in Tampa, and seven in Treasure Coast, Fla.
Who will be running the reorganized 32-year-old Woodside after bankruptcy court remains to be seen.
The plan calls for its creditors, as Woodside’s new owners, to select their own slates of directors, officers, and managers. Leonard Arave, Woodside’s CFO, who is currently running for Mayor of North Salt Lake, Utah, stated on his Website that he and other Woodside officers are being sued by the company’s creditors, and that he would leave the company once its plan is confirmed by the court.
Jeremy Richards, an attorney representing Woodside from the law firm Pachulski, Stang, Ziehl & Jones in Santa Monica, Calif., told BUILDER that creditors have mostly signed off on Woodside’s reorganization plan, although there are still some details that need to be hashed out, such as Alameda’s relationship with another developer in a joint venture.
While Richards is fairly confident that Woodside is nearing the finish line in its bankruptcy ordeal, he’s not quite ready yet to state when the court will finally approve that plan and set an effective date for its execution. “I’ve been through too many of these to make predictions,” he quipped.
John Caulfield is senior editor for BUILDER magazine.