Lenders objected Thursday to a plan by the owner of the bankrupt Park Highlands planned community development in North Las Vegas to auction off the property and buy the 1,340 acres of land at a discount in the auction.
The objections were filed in U.S. Bankruptcy Court in Las Vegas in the case of November 2005 Land Investors LLC, Park Highlands’ parent company, which filed for bankruptcy for a second time on July 6.
http://www.vegasinc.com/news/2011/jul/07/park-highlands-bankruptcy-again/
With the property encumbered by debt totaling $178.9 million, and a Park Highlands affiliate being the “stalking horse bidder” with a bid already on the table for $15.2 million, it’s little surprise that holders of that debt are suspicious of Park Highlands’ plan to auction the undeveloped land. As things stand, they would lose all but $12 million they are owed.
“This is not the usual case where a debtor, after reaching a consensual arrangement with its secured lenders for the disposition of the collateral of the secured lenders, files for bankruptcy protection and subsequently seeks court approval to sell substantially all of its assets through an auction process,” said a filing by Wilmington Trust, National Association, speaking for both itself and as first lien agent for other first-lien lenders owed $123.5 million.
“Instead, much to the surprise of the First Lien Agent and certain of the members of the First Lien Lender Group, these debtors appear to have undertaken a unilateral path to reacquire the collateral of the First Lien Lenders at an artificially low price through an affiliate of the debtors in an auction occurring after filing Chapter 11 cases for the debtors,” the filing said.
Wilmington Trust said it’s not necessarily opposed to an auction, but it’s challenging several provisions of Park Highlands’ plan that Wilmington Trust says benefit the Ross Perot-controlled company to the detriment of lenders.
An affiliate of a Ross Perot company, Hillwood Communities of Dallas, in December acquired the Park Highlands parent company, November 2005 Land Investors.
For instance, Wilmington Trust said, a Perot company called BOH Park Highlands NV plans to bid on the land for $15.2 million. Of that, $3.2 million would be a credit bid covering money owed by Park Highlands to BOH Park Highlands NV.
Wilmington Trust says this credit bid plan should be thrown out, as Wilmington Trust holds the first lien debt against Park Highlands. Elimination of the credit bid would produce that much more cash for lenders at the auction.
Wilmington Trust – which was joined in its objection by lender Credit Suisse Loan Funding LLC – also complained about other provisions of the stalking horse bid plan.
These include a plan for BOH Park Highlands NV to put up an earnest money deposit of $1.52 million, with $300,000 of that earmarked to cover the bankruptcy administration costs. But Wilmington Trust said that cash can’t be used without its consent as it’s collateral for its loan — and it won’t consent to the $300,000 covering administration costs.
The lenders also complained about a plan in the stalking horse bid proposal for Perot’s company to receive a break-up fee of $300,000 and reimbursement of up to $100,000 in expenses should the land be sold to another party. The lenders said these provisions are unjustified because an affiliate of Park Highlands will be the stalking horse bidder and no efforts were made to find another stalking horse bidder.
“The First Lien Agent is concerned that the debtors and their proposed financial advisors (Odyssey Capital Group LLC) have apparently failed to conduct any marketing of the property to date in order to establish whether the terms of the proposed stalking horse bid are the best available terms, instead choosing to focus exclusively on formulating an insider offer to purchase the property,” said the filing by Wilmington Trust.
Park Highlands hasn’t yet responded to the lenders’ filings.
But such back and forth between parties is common, so it’s likely the terms of the stalking horse bid will change and, as Wilmington Trust put it: “It is anticipated that a superior stalking horse offer may be presented at or prior to the (Aug. 11 bankruptcy court sales) hearing.”