The payback deadline is looming for Newhall Land and Farming Co.’s owner, which filed for bankruptcy protection nearly one year ago. But as the payback date approaches, the effects of the bankruptcy have trickled down to the local level.

LandSource Communities Development, LLC, filed for Chapter 11 protection on June 8, 2008, and must start repaying its debt after May 31.

“Obviously, our budgets are greatly restricted because of both (the bankruptcy and the economy),” Newhall Land spokeswoman Marlee Lauffer said Friday. “There’s very little construction activity. (But) there’s not a lot of new construction going on anywhere in Southern California.”

Lauffer said the company expects to emerge from the bankruptcy filing intact, without having to sell any major assets.

Those assets include the Valencia Water Co. and the Tournament Players Club, both owned by Newhall Land.

The way forward for the company, she said, will also include developing Newhall Ranch, a 21,000-home, Valencia-sized community planned southwest of the Interstate 5/Highway 126 junction.

LandSource’s bankruptcy travails have also put a damper on the charitable side of Newhall Land, Lauffer said.

“We’re unable to participate in charitable activities, (but) local nonprofits are very understanding,” she said. “As we become reorganized, we’ll be back as a valuable member of the nonprofit contribution scene.”

“It’s a big wait-and-see,” Santa Clarita spokeswoman Gail Ortiz said of the LandSource reorganization. Given the state of the national economy, “if this was a standalone issue, it would be a much bigger deal.”

City officials are paying attention to the reorganization, she said, “mostly because we want to see what’s going to happen with (Newhall Land).”

The developer has partnered with the city through the years. A recent example of that partnership involves the construction of new on/off-ramps at the Interstate 5/Magic Mountain Parkway interchange. Newhall Land provided funding for the work.

LandSource 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.

The financing included a $135 million line of credit, allowing LandSource to carry on with business during the reorganization.

Understanding the present nature of the LandSource debacle means backtracking.

In 2004, Miami-based home builder Lennar Corp. and partner LNR shelled out about $1 billion to buy Newhall Land, the Santa Clarita-based mastermind of Valencia.

Flash forward to March 2007, when Barclay’s invested $1.55 billion to finance LandSource – a joint venture between Lennar, LNR Property Corp. and MW Housing Partners.

The mission of LandSource – which took ownership of Newhall Land – was to create ready-to-build home sites and commercial properties in California, Arizona, Florida, New Jersey, Nevada and Texas.

In 2007 more than 60 percent of LandSource was sold to the California Public Employees Retirement System, or CalPERS.

By 2008 the company had run into trouble restructuring its debt and defaulted on loan payments. On June 8 of last year, LandSource filed for bankruptcy protection in U.S. Bankruptcy Court in Delaware.

The debtor-in-possession financing expires May 31, and the next scheduled reorganization plan hearing is set for May 1 in a Delaware courtroom.

After multiple changing of hands, Newhall Land has become little more than a brand name, despite its more than 140-year home in the Santa Clarita Valley community, according to a local attorney.

“The Newhall Land and Farming name has a lot of cache,” said Lou Esbin, a certified bankruptcy expert. “It’s not the Newhall Land that existed prior to the sale to Lennar. The people may be the same, but the company is not.”

Esbin, who represents three businesses that contracted with Newhall Land, is keeping a close watch on the reorganization plan for LandSource.

He explained that Lennar plans to provide roughly $140 million – about 10 percent of the outstanding debt – in exchange for 15 percent of the new entity that comes out of the reorganization.

The trade publication Big Builder News reported last week that the money Lennar is offering comes with conditions relieving the company of previous obligations including bonds and development costs – obligations estimated to be worth about $55 million.

How the LandSource matter ultimately will affect Newhall Land’s operations remains to be seen.

Local vendors who provided goods and services may not be paid back the amounts they are owed, Esbin said.

When it comes to Newhall Ranch, he said: “The land is there, and (the economy is) always going to go through cycles.

“At some point, Newhall Ranch will be built. At what price point, I can’t begin to say.”

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