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Newhall Land owner safe until June

Judge's $1.19 billion order keeps LandSource afloat for almost a year

Posted: July 22, 2008 1:44 a.m.
Updated: September 22, 2008 5:02 a.m.
Newhall Land and Farming Co. owner LandSource Communities Development LLC hammered out a settlement over the weekend among its secured and unsecured creditors, allowing all involved in the bankruptcy filing to agree on a $1.19 billion secured financing package.

United States Bankruptcy Court Judge Kevin J. Carey signed an order Saturday detailing how the nationwide land developer was expected to deal with its creditors.

The bottom line is that LandSource has just under a year to turn things around before its main lender, Barclay's Bank, can foreclose on the company.

In the meantime, who gets paid and in what order they are paid is what is contained in Carey's 75-page decision.

The $1.185 billion secured financing package - called Debtor in Possession funding - is made up of $1 billion in money previously loaned to LandSource by Barclay's Bank and an additional $100 million now pledged by the bank to cover the company's operating costs.

It effectively allows LandSource and its subsidiaries, such as Newhall Land, to keep operating.

The news was well-received at Newhall Land, Santa Clarita Valley's oldest land development company.

"On Saturday, a judge approved LandSource DIP financing which puts in place the budget and financing needed to allow LandSource, including Newhall Land, to keep going forward," Newhall Land spokeswoman Marlee Lauffer said Monday.

Carey had given LandSource and its creditors until July 18 to come up with some sort of a settlement.

On Friday, LandSource officials announced that they had reached the judge's deadline with a brokered settlement.

Earlier in the month, the judge refused to approve additional financing of LandSource after weighing the objections voiced by unsecured creditors.

He issued the deadline after an eight-hour hearing on July 14, related to a proposed $1.185 billion debtor-in-possession loan that would refinance the company's debt and provide it with operating capital while it restructures in bankruptcy.

Saturday's order by the judge detailing the pecking order among creditors lined up to collect on debts owed by LandSource was called an "important milestone," by Lauffer.

"It allows LandSource to focus on restructuring their debt and, at the same time, we can continue to move forward on some of our activities in accordance with the approved budget," she said.

Of the numerous assets owned by LandSource, the Valencia Water Company remains off the table.

The water company - one of four water retailers that supplies water to Santa Clarita - is wholly owned by Newhall Land, which is in turn owned by LandSource.

According to his order Saturday, Carey identified the Valencia Water Company as not being a part of the collateral listed by the banks who lent money to LandSource.

That news was reassuring for water officials Monday.

"The Valencia Water Company is not part of the bankruptcy proceedings," Valencia Water Company President Robert J. DiPrimio said.

Asked about the judge's ruling issued on the weekend, DiPrimio said: "I am not aware of that decision, but we're not involved in any of it.

"I'm happy to be outside the proceedings."

On June 8, LandSource Communities Development LLC, owner of Newhall Land, filed a voluntary petition for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.

LandSource, which plans and develops master-planned communities and transforms land into ready-to-build home sites and commercial properties in Arizona, California, Florida, New Jersey, Nevada and Texas, had attempted for several months to reach agreement with its lenders to restructure its debt. LandSource defaulted on loan payments due April 22.

LandSource has received commitments for debtor in possession financing from a group of lenders led by Barclay's Bank, including a $135 million revolving line of credit that will enable LandSource to meet post-petition obligations and fund operations during the Chapter 11 reorganization.

The additional DIP financing will enable LandSource to operate for the next year.


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