Confirmation hearing postponed for American West Development's plan

By Jim Witters

Wilmington, Del., Jan. 16 - The confirmation hearing for American West Development, Inc.'s first amended Chapter 11 plan of reorganization has been postponed until Jan. 31, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Nevada.

As previously reported, American West revised its plan and amended its homeowner disclosure statement following an October refusal by Judge Mike K. Nakagawa to confirm the originally proposed plan of reorganization.

The confirmation hearing for the amended plan had been scheduled for Jan. 15.

Amended plan

The amended plan provides that:

• Holders of priority claims will be paid in full in cash on the plan effective date;

• Holders of secured claims will receive payments and performance by the reorganized debtor under new secured loan documents;

• Holders of bond claims will be paid in the ordinary course of business;

• Holders of old equity interests will not receive any recovery;

• Holders of allowed class 3 general unsecured claims to a share of a $1.5 million cash pool up to the allowed principal amount of their claims;

• Secured lenders will waive their general unsecured deficiency claims in class 3 if the class three voters, as a class, accept the plan;

• Liability for class 4 construction defect claims will be channeled to a construction defect trust.

The trust will consist of $1.5 million cash, if at least 80% in number of the holders of class 4 claims vote to accept the plan. A portion of the trust will initially be used to make cash-out payments.

If less than 80% in number of the class 4 claims holders vote to accept the plan, the trust amount will be $500,000, and the cash-out option will be unavailable.

The construction defect trust also will hold potential claims against insurance proceeds and other causes of action contributed by the debtor and its affiliates;

• The existing equity interests will be canceled, and ownership of the reorganized company will be vested in the debtor-in-possession lender;

• The DIP lender will provide $10 million for payments under the plan, provide cash for the construction defect trust and provide working capital for the reorganized company; and

• The funding amount will not change regardless of the voting results for class 4. If less than 80% in number of the holders of class 4 claims vote to accept the plan, $1 million of the $10 million from the DIP lender will go to the reorganized debtor as additional working capital.

The company has reached settlements with all the holders of class 3 claims who asserted timely claims, capping aggregate liability at $1.8 million.

The debtor's "exposure to construction defect claims remains contingent and highly uncertain," according to court documents. But the company estimates the aggregate maximum of $80 million.

American West, a Las Vegas-based homebuilder, filed for bankruptcy on March 1, 2012. Its Chapter 11 case number is 12-12349.

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