Bankrupt WCI Communities on Monday filed a reorganization plan with U.S. Bankruptcy Court in Delaware that it said would make the company "a de-leveraged lifestyle community developer and land holding company with the flexibility to navigate its business during these unprecedented times and beyond."
The Bonita Springs, Fla.-based company said the plan would restructure the approximately $1.8 billion in debt it carried when it filed for bankruptcy last August into $450 million in new first-lien debt and ownership stakes in the company. The plan, however, has not been endorsed by committees representing the company's creditors.
"While we would have preferred to have a filed plan that was fully consensual with our secured lenders and our official committee, we felt it was in the best interest of all of our stakeholders to commence the plan approval process, which is likely to take about three months," said David L. Fry, the interim president and CEO who was elevated from COO when former CEO Jerry Starkey was dismissed during the Chapter 11 filing last August.
WCI explained that it decided to proceed with the filing without the approval of the Steering Committee of secured lenders or the Unsecured Creditors Committee because it believed "parties' positions were sufficiently close" and that the plan was "reflective of the positions taken in lengthy negotiations that have occurred since early 2009."
Under the plan, secured lenders would receive new first-lien debt of $450 million, including a $150 million payment-in-kind component and an initial 95% equity stake in the reorganized company. The remaining 5% would be shared by the WCI's unsecured creditors. The unsecured creditors' share would begin to increase when the new debt is fully retired and would reach a maximum of 35% after the secured lenders have received payments that are equivalent to the approximately $770 million that is owed them.
Under protection of the bankruptcy court, WCI has continued to complete homes under construction and to maintain its communities and their amenities but has suspended all new construction activities in Florida, its primary market. It also operates in New York, New Jersey, Connecticut, Virginia, and Maryland and still employs approximately 1,170 people and 1,800 sales representatives who operate as independent contractors.
In its most recent filing with the court, filed for the month of March 2009 on May 13, the company listed assets of $1.432 billion versus liabilities of $1.97 billion. It listed cash receipts of $42 million and disbursements of $29.8 million.
Separately, the company has begun adding a clause to its "forward-looking statements" disclosure boilerplate that warns of the possibility of "the negative impact of claims for contract rescission including the impact of any Chinese drywall claims or lawsuits by contract purchasers."