Meruelo Maddux Properties tweaks plan; CB&T agrees to change vote

By Caroline Salls

Pittsburgh, March 25 - Meruelo Maddux Properties, Inc. requested court approval to make changes to its plan of reorganization that would unimpair three classes of general unsecured claims that voted to reject the plan and incorporate treatment agreements and a court ruling, according to a Thursday filing with the U.S. Bankruptcy Court for the Central District of California.

Specifically, the company said it is looking to change the plan to:

• Unimpair the three classes of general unsecured claims that voted to reject the plan;

• Provide that secured claims of Chinatrust Bank and PNL Pomona, LP will be guaranteed by MMPI and modify interest rates consistent with testimony concerning secured claims of Chinatrust, PNL and Bank of America.

Meruelo Maddux said it also wants to shorten the term of each of these loans to five years from seven years if the court rules that the interest rate applicable to a seven-year plan term is different than the rate proposed by the company.

The company is proposing 5.38% and 5.24% interest rates on two Bank of America claims, a 5.94% interest rate on the Chinatrust claim and a 6.3% interest rate on the PNL claim;

• Incorporate agreements on the treatment of the secured claims and unsecured guaranty claims of CB&T and Cathay Bank.

Under the plan, Cathay's secured claims must be increased by more than $10.2 million, and other benefits provided under a settlement with Cathay must be eliminated;

• Provide for a possible agreement on the treatment of a Los Angeles County Metropolitan Transit Authority general unsecured claim and incorporate an agreement related to post-bankruptcy real property taxes owed to San Bernardino County;

• Reflect a court ruling related to corporate governance issues;

• Resolve an objection filed by the California State Board of Equalization;

• Establish modified procedures for the assumption and rejection of executory contracts and unexpired leases; and

• Provide for the continuation of internal controls recently adopted by the company.

Vote change request

In addition, Meruelo Maddux is asking the court to allow CB&T to change its vote to accept the plan, provided that the amended treatment related to a loan modification agreement is approved.

According to the motion, Meruelo Maddux and CB&T have agreed on the treatment of CB&T's claims under the plan and resolved CB&T's objection.

Under the agreement, the company's CB&T loan will be reinstated, and CB&T will waive any principal, interest or late charges that exceed the loan balance payable before the plan effective date.

The company said this reflects a waiver of more than $835,000 in accrued default interest charges.

The loan maturity date will be extended to June 30, 2015 from April 1, 2013.

The non-default interest rate will be a fixed rate of 5.5%, compared with the California Bank & Trust Prime rate plus 50 basis points with a 5.5% floor.

The company said its plan confirmation hearing is ongoing.

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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