Levitt unit defaults on $306.5 million of acquisition and construction loans

By Caroline Salls

Pittsburgh, Oct. 22 - Levitt Corp. homebuilding subsidiary Levitt and Sons, LLC has received four notices of default in connection with the subsidiary's decision to stop making interest payments and Levitt's refusal to make advances to Levitt and Sons until it obtains concessions or restructuring agreements with its principal lenders.

According to an 8-K filed Monday with the Securities and Exchange Commission, Levitt and Sons is in negotiations with its principal lenders on potential concessions or a debt restructuring.

Specifically, Levitt and Sons received notices of default from Wachovia Bank, NA on three separate loan facilities, including a $125 million loan to fund land acquisition, development and construction, a $30 million construction loan and a $26.5 million land acquisition, development and construction loan.

The fourth notice of default came from KeyBank NA in connection with a $125 million revolving land acquisition, development and residential construction borrowing base facility.

Levitt said the default notice on the $125 million Wachovia loan said liens have been filed on some assets pledged as security for the loan. As of Sept. 30, $102.35 million was advanced under this facility.

On the $30 million Wachovia loan, the default notice said the financial projections provided to Wachovia indicate a general inability of Levitt and Sons and its affiliates to pay debts as they become due. As of Sept. 30, $9.52 million was advanced under this facility.

In connection with the default on the $26.5 million Wachovia loan, Levitt said the notice of default claims the loan matured and became due on Sept. 29 and that the failure to pay all amounts due by Oct. 18 constituted an event of default under the loan.

The notice said interest will accrue after Oct. 18 at the default rate and that Wachovia reserves the right to collect the amounts due together with collection and enforcement expenses. As of Sept. 30, $8.59 million was advanced under this facility.

Until the events of default are cured, Wachovia said it would not advance additional amounts under the facilities and would not release any property from its liens.

Meanwhile, KeyBank has demanded payment of all amounts due under the $125 million revolver by Oct. 25. At Sept. 30, there was $95.23 million outstanding on the KeyBank loan.

Additional defaults possible

In addition, although Levitt and Sons has not received any other formal notices of default, Levitt said Levitt and Sons and its subsidiaries are also not in compliance with their obligations under Bank of America and Regions Bank loans, which were used to fund land acquisition, development and construction at Levitt and Sons' projects in Florida and Tennessee.

These violations include failure by Levitt and Sons and its subsidiaries to make required payments and/or maintain required development activity, the existence of liens at the projects securing the loans and the existence of defaults under other loans.

Levitt said these lenders could accelerate payment of the project loans and begin foreclosure proceedings against the assets securing the loans.

The 8-K said Levitt and Sons is not currently in a position to cure any defaults that may arise on these loans.

Levitt is a Fort Lauderdale, Fla.-based homebuilding and real estate development company.

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