Lehman closes development sale, eyes stay enforcement against SunCal

By Caroline Salls

Pittsburgh, May 25 - Lehman Brothers Holdings Inc. has closed the $71 million sale of three southern California real estate developments to SunCal, according to a SunCal news release.

SunCal said it won an April bankruptcy auction for the developments.

Lehman was an equity partner and lender in the projects, one in Kern County and two in Riverside County, which represent more than 4,300 combined acres of land.

As a result of the now-completed purchases, SunCal said funds are available for a court-appointed trustee to pay creditors claims. SunCal said the developments had been in limbo since 2008.

SunCal blasts manager

SunCal said the affairs of Lehman Brothers, the former partner of SunCal Cos., are now being managed by Alvarez & Marsal.

"Because Lehman was not the majority lender, as they are in other related cases, Alvarez & Marsal was not able to block a resolution and prevent this 363 Sale from taking place," SunCal senior vice president of public affairs David Soyka said in the release.

"The public auction allowed SunCal to step up to the plate and become the high bidder.

"This is how the bankruptcy system is supposed to work; a restructuring that allows the assets to be liquidated and move the process forward.

"Unfortunately, Alvarez & Marsal has blocked every attempt at similar efforts in the other pending Lehman cases."

The three properties being sold were the subject of a bankruptcy action that is separate from two other bankruptcy cases involving more than 20 projects where SunCal Cos. and Lehman Brothers partnered to create residential communities, the release said.

Stay enforcement motion

On Tuesday, Lehman asked the U.S. Bankruptcy Court for the Southern District of New York to enforce the automatic stay imposed by its bankruptcy filings in an attempt by some SunCal entities to launch "additional offensives in their bankruptcy cases aimed at bypassing [Lehman Commercial Paper Inc.]'s automatic stay and depriving it of its property interests."

Lehman said some of the SunCal debtors and non-debtor affiliate SunCal Management LLC have asked a California bankruptcy court to disallow 14 claims, totaling billions of dollars, held by Lehman Commercial Paper against the SunCal debtors in their own bankruptcy cases.

According to the motion, the SunCal entities allege that Lehman Commercial Paper's failure to turn over avoidable transfers, the prosecution of which is stayed, justifies disallowance of the claims.

In addition, Lehman said SunCal alleges that it can "recoup" some damage claims from the claims filed by Lehman Commercial Paper by taking the first dollars from a sale of Lehman Commercial Paper's collateral.

Lehman said SunCal argued that its actions are defensive and the automatic stay does not apply.

Lehman said the SunCal debtors "have continued to play "Russian-Roulette" with LCPI's automatic stay, choosing at random when to seek stay relief and when to argue the stay does not apply."

A hearing on the stay enforcement is scheduled for June 15.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13555.

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