U.S. Bankruptcy Court for Delaware
Case No. 09-10571-BLS WL Homes LLC (Main Case)
Judge: Brendan Linehan Shannon
Date filed: 02/19/2009
Debtor's Main Business Address:
19520 Jamboree Road
Irvine, CA 92612
WL Homes LLC USA
John Laing Homes
John Laing Homes Luxury
Laing Luxury Homes
John Laing Urban
Cases to be Jointly Administered With This Case:
09-10572-BLS JLH Realty & Construction, Inc.
09-10573-BLS JLH Arizona Construction, LLC
09-10574-BLS WL Texas LP
09-10575-BLS Laing Texas LLC
According to Chief Restructuring Officer's declaration, debtor has non-consolidated joint ventures. It is unclear whether those joint ventures are included in any of the 5 Chapter 11 cases. JVs are said to be with Weyerhaeuser, Resmark and RFC.
Debtors Lawyer: Laura Davis Jones
Pachulski Stang Ziehl & Jones LLP
919 N. Market Street
Wilmington, DE 19899-8705
Fax : 302-652-4400
Debtors Claims Agent: Omni Management Group LLC
Free View Website Not Set Up Yet
Date of Hearing on "First Day Motions": 2/20/09
What First Day Motions Debtor Requests to be Heard: More than I've ever seen. Go on Delaware Bankruptcy Court PACER if you need to read them.
Debtor in possession financing: To be provided by affiliate of debtors' owner
Chief Restructuring Officer: Bradley D. Sharp (Hired pre-bankruptcy)
Development Specialists, Inc.
Chief Restructuring Officer's declaration in support of First Day Motions is the most factually detailed one I have ever seen. If you are a creditor or other party involved with John Laing, it is worth logging onto PACER, downloading and printing it. It is Document 3 in the court's docket. All of the following information comes directly from that Chief Restructuring Officer's declaration, without any editorializing by me:
100% of equity owned by subsidiaries of Emaar Properties PJSC, a publicly traded Dubai company (June 2006 purchase price: $1.05 Billion)
November 30, 2008 unaudited balance sheet for debtors show:
$1,300,000,000 in assets
$977,000,000 in liabilities
The "creditor matrix" (names and addresses of known creditors) in the Bankruptcy Court file is 30 pages long.
There are non-debtor affiliates still operating. Their names are on Exhibit "A" to Mr. Sharp's declaration.
Debtors had 105 ongoing projects at the time of bankruptcy filing.
The declaration gives detailed description of what parts of the debtor's business the debtor intends to continue during the Chapter 11: Southern California homebuilding, John Laing luxury homebuilding, John Laing custom homebuilder operation. All other building operations are said to have stopped, and the chief restructuring officer indicates all landholdings outside the three surviving homebuilding operations will be sold.
CREDITOR STRUCTURE per chief restructuring officer:
Secured revolving credit facility syndicated by Bank of America (Participants: Bank of the West, National City Bank, City National Bank, First Horizon Bank). Loan is said to be in default.
Secured revolving credit facility with Wachovia Bank, said to be in default.
Secured revolving credit facility with Guaranty Bank. Details said to be in Exhibit B to chief restructuring officer's declaration.
Secured revolving credit facility with RFC Construction Funding LLC, said to be in default. Secured term loan with RFC Construction Funding LLC, said to be in default. Collection lawsuit pending in Virginia.
Individual project loan with Bank of America. Loan is said to be in default.
Individual project loan(s) with Wells Fargo Bank. Details said to be in Exhibit B to chief restructuring officer'sdeclarationl.
Individual project loans(s) with Indymac Federal Bank details said to be in Exhibit B to chief restructuring officer'sdeclaration.
Individual project loan(s) with First Bank of Oak Park details said to be in Exhibit B to chief restructuring officer'sdeclaration.
Individual project loan(s) with Key Bank details said to be in Exhibit B to chief restructuring officer's declaration.
Individual project loan(s) with Housing Capital Company details said to be in Exhibit B to chief restructuring officer'sdeclaration.
Unsecured credit facility with Bank of America, said to be in default.
Total secured debt $350.6 Million, not including delinquent interest, penalties, late charges and "fees". In contrast, total liabilities said to be $977 Million.
Trade creditor debt is said to be more than $20 Million
Debtor owes $6.8 Million in deferred compensation due present and former employees
Debtor(s) said to have signed guarantees for joint ventures' debts as well
Debtors said to have entered into land purchase options with Hearthstone, Institutional Housing Partners and private parties. Declaration says debtors may have some liability arising out of failures to close escrow.
Debtors have $93.3 Million in surety bonds, $4.7 Million of which have been called.
Debtor's owners (Emaar) said to have made $206.5 Million in additional capital contributions to debtors after purchase of debtors. Debtor's owners also said to have lent $407.28 Million in loans to debtors after purchase of debtors and prior to bankruptcy.
Events leading to bankruptcy: Debtors owners deciding not to contribute more capital or unsecured loans to debtors. Debtors main operating bank accounts were allegedly frozen by Bank of America and Wachovia. Both banks set off against the accounts, and Wachovia's actions allegedly caused debtors' checks to bounce. On February 12, 2009, Debtors received 5 day notice to quit or pay rent on their Irvine headquarters office.
Employess remaining after February 2009 layoffs: 90 employees, mostly at Irvine headquarters, with weekly payroll cost of $270,000.
Debtors seek permission to honor any severance payment checks to former employees which did not clear prior to bankruptcy filing.
The Chief Restructuring Officer's declaration contains copious detail about the debtors' pre-bankruptcy construction defect insurance, customer care, warranty, HOA fee payment and sales incentive policies which they want to continue.
Other information from the docket (as opposed to the chief restructuring officer's declaration):
Document 18 in the bankruptcy court's docket is a motion which seeks to set up an "expedited program" to sell the debtors' undeveloped land and partially developed land free and clear of liens. [I haven't read it, but this is the kind of motion the existing secured creditors are likely to attack, so don't count on this motion being approved right away by the bankruptcy judge.]
Document 19 in the bankruptcy court docket is a motion to approve debtor in possession financing.
Document 17 in the bankruptcy court docket is a motion to approve the sale of completed homes free and clear of liens. In the chief restructuring officer's declaration, he said customers' deposits were returned to them prior to the bankruptcy filing.
Documents 25 and 28 pertain to emergency motions for a protective order and for relief from stay for the debtor to pay premiums to Zurich Insurance. [Zurich is well known as an insurer of brownfield redevelopment projects. Debtor is the owner of one such project, as described in the chief restructuring officer's declaration.
Document 13 in the court's docket is a motion for an order that the Unsecured Creditors Committee may not make public any information given to it by the debtors, and that the Unsecured Creditors Committee has no obligation to make that information available to the unsecured creditors. [The later is contrary to existing case law, but I've never seen an unsecured creditor object to this sort of motion when this debtors counsel seeks one.]
Bank of America has already appeared in the case, to say that its attorneys are Phillips Goldman & Spence in Delaware and Donald Gaffney of Snell & Wilmer in Phoenix. Mr. Gaffney is one of the principal nemesis of Woodside Homes and its owners in their Chapter 11 case. Woodside Homes and John Laing Homes have the same law firm as debtors counsel.
RFC Construction Funding, Inc. has also appeared in the case, to say that its attorneys are Landis, Rath & Cobb of Delaware and K & L Gates of Dallas. Permalink
Here are the key word titles of the bankruptcy court's orders on the "First Day Motions" made by the debtors in the WL Homes LLC (aka John Laing Homes) Chapter 11 case in Delaware:
Court Doc. #
55 Order Authorizing The Debtors To Honor Prepetition Obligations To Customers And To Otherwise Continue Customer Practices And Programs In The Ordinary Course of Business
54 Order (INTERIM) (A)Prohibiting Utilities from Discontinuing Service , Altering or Refusing Service, (B)Deeming Utilities Adequately Assured of Future Performance, And (C)Establishing Procedures For Determining Adequate Assurance of Payment
53 Order Granting Debtors Motion (I)Authorizing Payment of Certain Prepetition Sales, Use, Franchise, Personal And Real Property Taxes And (II)Authorizing And Directing Financial Institutions To Honor And Process Related Electronic Transfers And Checks
51 Order Granting Debtors Motion Authorizing The Debtors To (I)Pay Prepetition Wages, Salaries, Employee Benefits, And Other Compensation; (II)Remit Withholding Obligations; (III)Maintain Employee Compensation And Benefits Program And Pay Related Administrative Obligations; And (IV)Have Applicable Banks And Other Financial Institutions Receive, Process, Honor And Pay Certain Checks Presented For Payment And Honor Certain Fund Transfer Requests
50 Order (WITH MODIFICATIONS MADE BY THE COURT) Authorizing (I)Maintenance of Certain Existing Bank Accounts, (II)Continued Use of Existing Business Forms, (III)Continued Use of Existing Cash Management System, (IV)Providing Administrative Priority Status To Postpetition Intercompany Claims, And (V)Waiver of Deposit And Investment Requirements
49 Order Granting Application For Authorization To (1)Employ and Retain Omni Management Group, LLC As Claims, Balloting, Noticing And Administrative Agent For The Debtors And (2)Appoint Omni Management Group, LLC as Agent of The Bankruptcy Court
48 Order Directing Joint Administration of Related Chapter 11
FROM THE POINT OF VIEW OF JOHN LAING'S CURRENT EMPLOYEES, THE MOST IMPORTANT FIRST DAY ORDER, AUTHORIZING THE COMPANY TO PAY PRE-PETITON PAYROLL AND MAINTAIN PAY LEVELS ON AN ONGOING BASIS WAS APPROVED AND SIGNED BY THE JUDGE.
From the point of view of the company's employees over the longer term, as of 6:30PM Delaware time on 2/20, the court had not posted any order signed by the judge which would authorize the use, even on an interim or temporary basis, of loan proceeds which an affiliate of the company's owners offered to make available as Debtor in Possession Financing. Since the motion for approval of that DIP financing on an interim basis said that the debtor would not be using the secured creditors' cash collateral to pay post-bankruptcy bills, its hard to figure out exactly what cash can be used to pay the upcoming payroll.
Bank of America, in its various capacities as lender, administrative agent and issuer of letters of credit for the debtors was the only lender to file any written objections to the first day motions. Bank of America objected to:
(1) The motion to sell the completed home inventory free and clear of liens;
(2) The motion to establish an expedited procedure to sell completed lots and partially completed lots free and clear of liens;
(3) The motion for interim approval by the court of Debtor in Possession financing. In connection with that motion, BofA made the customary demand for "adequate protection" of the lien priority of each of its lender groups which are holders of secured loans. BofA said it did not consent to the use of its "cash collateral" but did not identify that cash collateral. In the aggregate, BofA claims it is owned approximately $152 Million in principal. Bank of America's lawyers were most intensely focused on the proposed budget for the use of the DIP financing, in large part because there was no line item in the budget to pay interest due BofA on a going forward basis.
On a humerous note, BofA's lawyers accidentally left in their opposition a typed note from one lawyer to another. The note asked: Do we have an opinion on value? I sue hope so. The Comptroller of the Currency and the FDIC would be particularly upset if they did not!
The bankruptcy court's docket does not disclose the scheduling of any further hearing on this case until March 23rd. I will be interesting to see if the debtors are able to get the court to approve the DIP financing, on an interim basis, before that date. Permalink