Meruelo Maddux shareholders to pay all claims under competing plan

By Caroline Salls

Pittsburgh, July 15 - Meruelo Maddux Properties, Inc. shareholders Charlestown Capital Advisors, LLC and Heartland Asset Management Corp. have filed an alternate plan of reorganization for the company's bankruptcy case, under which all claims will be paid in full, according to a Wednesday filing with the U.S. Bankruptcy Court for the Central District of California.

Under the shareholder plan, non-insider holders of Meruelo Maddux stock will, at their option, receive either $16.00 for each 100 shares of stock they hold or a combination of $10.00 plus one share for each 100 shares of stock they hold.

Insider stockholders will receive $16.00 for each 100 shares of stock they hold and will not have the option to receive stock in the reorganized company.

The shareholders said new investors will purchase the remaining newly issued common stock in reorganized Meruelo Maddux for at least $30 million.

The MMPLP debtor will be merged into Meruelo Maddux, and MMPLP's equity interests will be cancelled.

Charlestown and Heartland said the plan will be funded from the reorganized company's operations, the infusion of at least $30 million of new capital and the sale or refinancing of some of the company's assets.

Creditor treatment

Creditor treatment under the shareholder plan will include:

• Holders of secured lender claims will receive deferred cash payments over a five-year period;

• Holders of unsecured claims will be paid in full in cash;

• Holders of settling unsecured guaranty claims will be paid in accordance with their settlements;

• Holders of non-settling unsecured guaranty claims will be paid in cash in five years with 3% interest;

• Holders of Meruelo Maddux insider interests will receive $16.00 per 100 shares of stock;

• Holders of non-insider Meruelo Maddux interests will receive either $16.00 per 100 shares or a combination of $10.00 plus one share for each 100 shares; and

• Holders of interests in the subsidiary debtors will retain their interests.

Company plan

As previously reported, under Meruelo Maddux's plan:

• Holders of common lender secured claims will be paid in full in cash over a period of five years if they vote to accept the plan or over a period of seven years if they vote to reject it;

• Holders of general unsecured claims will be paid in full over five years with 1% interest;

• Interest holders can receive either $0.08 per share or contribute cash and shares in exchange for new equity; and

• Holders of interests in subsidiary debtors will retain those interests.

Meruelo Maddux, a self-managed, full-service real estate company that develops, redevelops and owns commercial and multi-family residential properties, filed for bankruptcy on March 26, 2009. Its Chapter 11 case number is 09-13356.

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