Claims Against LandSource Could Net 1 Percent

Among myriad unsecured claims in the bankruptcy case of Newhall Land’s parent company are some $6.4 million in country-club membership fees, $2.2 million in claims by company employees and a half-million dollar construction tab picked up by the city.

If a judge signs off next month on the proposed Chapter 11 reorganization plan for LandSource Communities Development LLC, Newhall Land and Farming Co.’s unsecured creditors stand to get back up to 8 percent of their claims, according to court documents.

If the court rules to convert the case to a Chapter 7 liquidation case, those creditors would see about a 1-percent return.

That means if all the country club members in the claims register wanted their money back, they’d have to divide a pot of $512,000 — or $64,000 if the creditors see 1 percent.

Likewise, the city could look at recovering as little as $4,490 — or as much as $35,920.

Of the $34.4 million in unsecured claims against Newhall Land listed in the register, an 8-percent return would equal $2.75 million while a 1-percent return would leave a paltry $340,000.

In Santa Clarita’s case, the city spent $449,000 widening Newhall Ranch Road between Rye Canyon Road and Dickason Drive, with the promise that Newhall Land would reimburse the city, according to an attorney with Burke, Williams and Sorensen, the firm with which the city contracts.

“They’d always been good for it,” the attorney said, referring to past agreements between the city and Newhall Land.

All that changed after LandSource filed for Chapter 11 bankruptcy protection on June 8, 2008.

Earlier this month the committee of unsecured creditors filed a motion in the U.S. Bankruptcy Court in Delaware, asking for the reorganization plan to be converted to a Chapter 7 liquidation.

Attorneys for the city are still analyzing the proposal before making a recommendation to the city.

Taking up multiple pages of the claims register are 205 unsecured claims totalling roughly $6.4 million on the part of members of the Tournament Players Club Valencia, which is owned by Newhall Land.

Those claims represent membership fees, a Newhall Land official confirmed.

Local businessman Don Fleming is one of those members, having paid $15,000 when TPC opened in 2003, with an agreement that, if roughly three years later he decided to remain a member, he would pay an additional $10,000 — bringing his total membership fee to $25,000.

Membership fees listed in the claims register run the gamut from $15,000 to more than $40,000.

If a member ever decides to leave the club, Fleming explained, they are put on a list and when the club sells four new memberships, the people at the top of the list are refunded.

Fleming said he supports the reorganization plan, and added that if it were changed to a Chapter 7 suit, the club “would be padlocked the next day. … We certainly don’t want that to happen.”

The Newhall Land employee claims — $2.2 million worth — are primarily for benefits that include things such as deferred compensation and accrued vacation days — essentially the kind of benefits that would be paid out if someone resigned from the company, spokeswoman Marlee Lauffer said.

She declined to discuss any further specifics about the claims.

Throughout the reorganization process, Lauffer has reiterated the company’s faith in emerging from bankruptcy as a better, stronger organization.

Also on the claims register is a $1 million claim by Santa Clarita Organization for Planning and the Environment. President Lynn

Plambeck could not be reached Thursday for clarification of what the claim represents.

Likewise, local construction company R.C. Becker and Sons has a claim for more than $1 million. Chief financial officer Dan Schackart could not be reached Thursday.

When LandSource filed for Chapter 11 protection last year, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclays Bank.

If the Chapter 11 reorganization plan is approved, Lennar Corp., which was a majority owner of LandSource along with the California Public Employees’ Retirement System, will end up with 15 percent of the new stock at a cost of $140 million.

Lennar sold most of its 50-percent stake at the peak of the real-estate market for $660 million, and had a 16-percent stake in Newhall Ranch before the Chapter 11 filing.

Click HERE for the article.

Bankruptcy Drama Grips LandSource

“Wait and see.” That will be the name of the game over the next four weeks as stakeholders anticipate a hearing at which a judge could order that Newhall Land and Farming Co.’s bankrupt owner be split up, with assets sold off to the highest bidder.

The committee of unsecured creditors has requested LandSource Communities Development LLC’s Chapter 11 bankruptcy filing be converted to a Chapter 7 filing – changing it from a reorganization to a liquidation.

Chapter 11 bankruptcy allows a company to reorganize while a trustee operates the business. Under Chapter 7 bankruptcy, the business ceases operation and its assets are sold to satisfy its debts.

U.S. Bankruptcy Court Judge Kevin J. Carey will decide at a July 13 hearing whether to approve the submitted reorganization plan, or to rule in favor of converting it to a chapter 7 filing.

“So much is uncertain right now,” said city spokeswoman Gail Ortiz, who added city officials are concerned about the bigger picture of how the bankruptcy issues affect the local community.

While some bankruptcy attorneys remain skeptical that the creditors would even see much – if any – of a return through liquidation, the group stands to lose a lot either way.

The 186-page claims list includes 415 unsecured claims with local connections – either by local companies or against Newhall Land or another LandSource subsidiary – totalling roughly $23 million.

Unsecured claims are defined at www.uscourts.gov as claims or debts “for which a creditor holds no special assurance of payment, such as a mortgage or lien. (It is) a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.”

Among the unsecured claims in the LandSource filing is a nearly $300,000 claim by the William S. Hart Union High School District, and about a half-million dollars in claims by the city of Santa Clarita.

Hart district spokeswoman Pat Willett said Wednesday that district lawyers are trying to figure out what the claim is for.

If the district were to see any return, she said the money would have to go toward construction costs.

Assistant City Engineer Curtis Nay referred questions about the city’s claims to city attorney Carl Newton, who could not be reached Friday afternoon.

Newhall Land officials have remained tight-lipped about the future of one of the valley’s oldest companies.

“We’re in the middle of a court process that’s very defined,” said Newhall Land spokeswoman Marlee Lauffer. “We’re very encouraged by the reorganization plan, which is a very appropriate plan to bring the company out of Chapter 11.”

She declined to discuss what a Chapter 7 liquidation filing could mean for Newhall Land.

LandSource – owner of Newhall Land – filed for Chapter 11 protection on June 8, 2008. At the time, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclay’s Bank.

If the Chapter 11 reorganization plan is approved, Lennar Corp., which was a majority owner of LandSource along with the California Public Employees’ Retirement System, will end up with 15 percent of the new stock at a cost of $140 million.

Lennar sold most of its 50-percent stake at the peak of the real-estate market for $660 million, and had a 16-percent stake in Newhall Ranch before the Chapter 11 filing.

Click HERE to view the article.

LandSource Could Be Broken Up, Sold Off

The bankrupt owner of Newhall Land and Farming Co. may wind up with a trustee in charge of liquidating the corporation and selling off assets to the highest bidder.

On Friday, the committee of unsecured creditors submitted a request to have the U.S. Bankruptcy Court convert the Chapter 11 bankruptcy plan of LandSource Communities Development LLC to a Chapter 7 filing at a July 13 hearing in Delaware.

Judge Kevin J. Carey signed off on a reorganization plan June 1, sending it to the creditors for a vote. It will return to Carey July 13.

Chapter 11 bankruptcy allows a company to reorganize while a trustee operates the business. Under Chapter 7 bankruptcy, the business ceases operation and its assets are sold to satisfy its debts.

“The plan as constituted now doesn’t do the unsecured creditors any good,” said Louis Esbin, a Valencia bankruptcy attorney representing several companies that had contracts with Newhall Land.

The downside of a chapter 7 designation, Esbin said, is that it adds yet another layer of administration to an already labyrinthine situation.

The upside, Esbin said, is that “the trustee will be looking into every nook and cranny.”

LandSource’s business practices before and after the bankruptcy filing would be examined, he said.

The creditors committee is arguing the Chapter 11 reorganization plan violates bankruptcy law because unsecured creditors would fare better in a liquidation than through the distribution of stock they would see under the currently proposed plan.

Among the myriad unsecured creditors is the William S. Hart Union High School District, which is owed nearly $300,000, according to court documents.

Hart district spokeswoman Pat Willett could not be reached Wednesday afternoon.

LandSource – owner of Newhall Land – filed for Chapter 11 protection on June 8, 2008. At the time, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclay’s Bank.

Newhall Land spokeswoman Marlee Lauffer could not be reached Wednesday.

Newhall Land officials have stood by their belief the company will emerge from bankruptcy stronger. They say the company remains likely to break ground on Newhall Ranch by 2012.

The largest project remaining on the company’s plate is the development of Newhall Ranch, a Valencia-sized community of some 20,000-homes on 15,000 acres southwest of the Interstate 5-Highway 126 junction.

If the Chapter 11 reorganization plan is approved, Lennar Corp., which was a majority owner of LandSource along with the California Public Employees’ Retirement System, will end up with 15 percent of the new stock at a cost of $140 million.

Lennar sold most of its 50-percent stake at the peak of the real-estate market for $660 million, and had a 16-percent stake in Newhall Ranch before the Chapter 11 filing.

It remains to be seen whether Carey will approve the chapter 7 switch on July 13.

“Only the guy in the black robe knows,” Esbin said. “When they were handing out crystal balls, I dropped mine.”

Click HERE to view the article.

Newhall Ranch Opts Out Of Water Wars

With the statewide political battle over water from the Sacramento Delta raging, Newhall Land and Farming decided to opt of the water fight when it designed its Newhall Ranch project, according to a Newhall Land and Farming official.

“We’re building a water reclamation plant capable of recycling 6.8-million gallons per day,” said Marlee Lauffer, Newhall Land and Farming spokeswoman.

The project will also rely on water purchased from Central Valley suppliers and on water pumped from its own wells.

Not relying on state water takes Newhall Ranch out of the politically charged state water wars, Lauffer said. “The issue of reliability of state water has become a political issue,” she said.

“In the sense that the water is there and available for irrigation use, this is a smart move for Newhall Land and Farming,” said Jeff Ford, water resources planner for Castaic Lake Water Agency.

When built, the Newhall Ranch project will add 21,000 homes, commercial development and school buildings to a 12,000-acre site southwest of the Interstate 5-Highway and 126 interchange. To meet the water demand posed by new development, Newhall Land and Farming devised a multi-tiered plan to provide water.

Of the 17,000 acre-feet needed for the development, about 7,000 acre-feet will come from agricultural wells on the property. “We will go from ag (agriculture) wells to urban wells,” Lauffer said.

In dry years, Newhall Ranch, expects to get 1,600 acre-feet of supplemental water from farmers in Kern County, Lauffer said.

Another 7,000 acre-feet will come from the reclamation plant. More than 3,000 acre-feet will come from the Valencia Wastewater Treatment Plant, which is already online.

Pipes from the Newhall Ranch reclamation plant will deliver water to common areas around the development to water lawns and a golf course, Lauffer said.

The recycled water plant should not be confused with a toilet-to-tap recycling system, Ford said.

“This is a separate water-supply system. The potable (drinking) water system is not connected to the water-treatment plant,” he said. “The pipes from the water-treatment plant don’t go to homes and the piping is specially marked.”

Newhall Land’s piecemeal plan to acquire water has two major impacts, Lauffer said.

“There will be no net increase in state water,” she said.

The water pumping through the pipes will come from existing supply in the SCV and from effluent pumping from the Valencia Wastewater Treatment Plant. Newhall Ranch won’t have to buy additional water from Castaic Lake Water Agency to run the water system.

Castaic Lake’s water comes from the State Water Project, which has recently been mired in political and court battles.

Efforts being made to protect the Delta Smelt have resulted in lawsuit, which are limiting the delivery of water from the Sacramento Delta.

Castaic Lake Water Agency is also looking into bolstering in its own recycled water program.

“We’re in the second phase of a recycled water project that will deliver water from the Saugus treatment plant to the River Village development,” Ford said.

Currently the lone recycled water project in the SCV is the 400 acre feet that water the Tournament Players Club golf course in Valencia.

Click HERE to view the article.

Judge OKs Bankruptcy Plan

Home builder Lennar Corp. stands to buy a 15 percent stake in the Newhall Ranch project if a group of creditors signs off on a reorganization plan OK’d by a judge Monday for the project’s bankrupt parent company.

During a 2 1/2-hour hearing in Delaware, U.S. Bankruptcy Court Judge Kevin J. Carey signed off on the reorganization plan for LandSource Communities Development LLC, sending the plan to creditors for a vote, then back to Carey for final confirmation later this summer.

Newhall Land and Farming Co. officials have stood by their belief the company will emerge from bankruptcy stronger, and remains likely to break ground on Newhall Ranch by 2012.

The largest project remaining on Newhall Land’s plate is the development of Newhall Ranch, a Valencia-sized community of some 20,000-homes on 15,000 acres southwest of the Interstate 5/Highway 126 junction.

“There’s a very defined process,” Newhall Land spokeswoman Marlee Lauffer said. “We’re very encouraged by the progress that’s being made.”

LandSource – owner of Newhall Land – filed for Chapter 11 protection on June 8, 2008. At the time, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclay’s Bank.

Monday’s proposal would allow Lennar to buy 15 percent of the Newhall Ranch project, along with other properties, for $140 million.

Lennar sold most of its 50-percent stake at the peak of the real-estate market for $660 million, and had a 16-percent stake in Newhall Ranch before the Chapter 11 filing.

Robert Stevenson, an analyst with Fox-Pitt Kelton Cochran Caronia Waller LLC, told the Associated Press that the Newhall Ranch project is important to Lennar’s strategy of maintaining a foothold in the key Southern California market, especially when the region’s housing industry recovers.

How the reorganization plan will fare remains to be seen.

“I think the judge expressed significant concerns regarding the viability of the plan,” said Lou Esbin, a Valencia bankruptcy attorney, who represents several companies that contracted with Newhall Land.

Indeed, the creditors are encouraged to vote against the plan in a letter dated May 29, from the law offices of Pachulski, Stang, Ziehl and Jones on behalf of the committee of unsecured creditors, and filed with the court last week.

The letter states that converting LandSource’s Chapter 11 filing to a Chapter 7 case would be better for the creditors.

Under Chapter 7 of federal bankruptcy law, the court would appoint a trustee to review everything in the Chapter 11 filing and liquidate LandSource, selling assets at the best price available.

While Lennar keeps a seat at the table under the proposed reorganization plan, the plan deals a blow to the California Public Employees Retirement System, which would see its investments wiped out in the deal.

The pension fund and a group of investment partners paid $970 million for a majority stake in the venture in 2007.

“CalPERS has conducted a through review of the Lennar proposal and has determined not to participate, as this investment opportunity does not fit well with the future strategic director of our real-estate program,” spokesman Clark McKinley wrote in an e-mail Monday. “Otherwise, CalPERS has a $180 billion portfolio and is a long-term investor. This deal will have no direct or immediate impact on CalPERS members.”

Click HERE to view the article.

Stay in the Loop about the Newhall Ranch Development

Join our mailing list to receive the latest news and updates about the Newhall Ranch Project.

You have Successfully Subscribed!