LandSource emerges from bankruptcy as Newhall Land Development

By Caroline Salls

Pittsburgh, Aug. 3 - LandSource Communities Development LLC has emerged from Chapter 11 bankruptcy as Newhall Land Development LLC with more than $90 million of cash and no debt on its beginning balance sheet, according to a company news release.

As previously reported, the plan of reorganization submitted for the company by lender agent Barclays Bank plc was confirmed on July 20 by the U.S. Bankruptcy Court for the District of Delaware.

According to the release, Newhall Land will have the additional resources and financial flexibility necessary to focus on planning and developing the remainder of the existing community of Valencia and the future Newhall Ranch.

LandSource said Newhall Land is backed by strong ownership that consists of a group of investment funds led by Anchorage Advisors LLC, Third Avenue Management LLC, funds affiliated with Och-Ziff Capital Management Group, LLC, funds affiliated with Marathon Asset Management, LP and TPG Credit Management, L.P., along with Lennar Corp.

Newhall Land will be managed by Emile Haddad, the chief executive officer of Five Point Communities Management, Inc., which is a newly formed management company jointly owned by Haddad and Lennar.

"We are extremely pleased that we were able to complete our reorganization with the full support of our creditors and emerge as a stronger company," Haddad said in the release.

"Newhall now has an unleveraged balance sheet, sufficient cash to fund operations going forward and is well-positioned to navigate this unprecedented market."

Plan terms

Under the plan, Lennar will make a $140 million investment in the reorganized company.

In exchange for its investment, Lennar will receive 15% of new common stock, specified acquired assets and $13.5 million in claims.

The remaining 85% of the new common stock will be split, with rights offering participants to receive 56% and holders of first-lien, second-lien and general unsecured claims to receive 29%.

According to the disclosure statement, the Lennar acquired assets include 100% of the equity interest in Lennar Mare Island, LLC, Friendswood Development Co. and LLPII HCC Holdings, LLC; 50% of the equity interests in Lennar Wincrest, LLC held by LLP II Holdings LLC and 75% of the net proceeds of a DLA Piper lawsuit.

In addition to the Lennar investment, the proposed plan calls for a $140 million rights offering, to be backstopped by members of a steering committee.

Creditor treatment

Treatment of creditors under the plan will include:

• Holders of administrative expense claims, priority tax claims, permitted lien claims and priority non-tax claims will receive full payment in cash;

• Holders of first-lien and second-lien secured claims will receive a share of the equity in the reorganized company and the right to participate in the rights offering;

• Holders of non-Newhall debtors' general unsecured claims and Newhall unsecured claims will receive their share of new equity and the right to participate in the rights offering;

• Holders of convenience claims will recover 50% in cash;

• Intercompany claims will be either cancelled or reinstated, at the company's option; and

• Interests will be cancelled, and holders will receive no distribution.

LandSource, a Los Angeles-based developer of master-planned communities, filed for bankruptcy on June 9, 2008. Its Chapter 11 case number is 08-11111.

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