LandSource files Chapter 11 bankruptcy after failing to reach lender agreement, gets $1.19 billion DIP loan

By Jennifer Lanning Drey

Portland, Ore., June 9 - LandSource Communities Development LLC filed Chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court for the District of Delaware after being unable to reach an agreement with its lenders on a plan to modify and restructure its debt, according to a company news release.

The company said it tried to reach an agreement with its lenders on an interim plan that would provide time for a complete review of its financial situation and the development of a long-term solution to its current difficulties.

LandSource said it expects to survive the current real estate downturn and credit crunch barring further retrenchments in the California market.

DIP facility details

In conjunction with the Chapter 11 filing, LandSource has received commitments for $1.19 billion in debtor-in-possession financing from a group of lenders led by Barclay's Bank. The financing includes a $135 million revolving line of credit that will allow the company to fund operations during the Chapter 11 period.

The company has requested interim approval to access $35 million of the financing.

The facility includes a $35 million letter-of-credit subfacility and a $10 million swingline facility and a junior secured term loan comprising the roll-up of up to $1.05 billion of pre-bankruptcy obligations, according to a Monday court filing.

The DIP will mature on the earlier of May 31, 2009, 364 days after the bankruptcy filing date, 35 days after the entry of an interim order if a final order has not been entered, the effective date of a confirmed plan and acceleration and termination in accordance with the DIP agreement.

Interest on the revolver will be the Eurodollar rate plus 600 basis points or alternative base rate plus 500 bps. Interest on the term loan will be Eurodollar rate plus 750 bps or alternative base rate plus 650 bps.

Largest unsecured creditors

LandSource's largest unsecured creditors include:

• PCL Construction Services, Glendale, Calif., with a $6.05 million trade claim;

• Altfillisch Contractors Inc., Corona, Calif., with a $1.66 million trade claim;

• Park West Landscape, Pacoima, Calif., with a $1.25 million trade claim;

• Oakridge Landscape, Inc., North Hills, Calif., with a $1.06 million trade claim;

• Southern Sun Construction Co., Costa Mesa, Calif., with a $1.01 million trade claim;

• Hunsaker & Associates, Valencia, Calif., with a $905,156 professional services claim;

• Psomas & Associates, Santa Clarita, Calif., with an $816,033 professional services claim;

• John Burgeson Contractors Inc., Canyon Country, Calif., with an $800,151 trade claim;

• RC Becker and Son Inc., Santa Clarita, Calif., with a $780,720 trade claim; and

• CH2M Hill, Inc., Santa Ana, Calif., with a $710,062 trade claim.

LandSource is a Los Angeles-based developer of master planned communities. It Chapter 11 case number is 08-11111.

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