South Edge lender agent, settling builders file plan of reorganization

By Caroline Salls

Pittsburgh, Aug. 2 - South Edge, LLC's pre-bankruptcy credit agreement administrative agent JPMorgan Chase Bank, NA and the company's settling builders filed a plan of reorganization and related disclosure statement for South Edge's bankruptcy case Monday with the U.S. Bankruptcy Court for the District of Nevada.

The four settling builder plan proponents are company members and parent affiliates KB Home, Toll Brothers, Inc., Weyerhaeuser Real Estate Co. and Beazer Homes Holdings Corp.

According to the disclosure statement, the plan enables non-insider creditors to receive substantial distributions within the next few months, ends years of contentious and expensive litigation between the agent and settling builders and creates a platform for future development of South Edge's "Inspirada" master planned community.

In addition, the plan calls for "prompt and significant" distributions to secured pre-bankruptcy lenders, as well as payment in full of all priority and administrative claims and establishment of a $1 million fund for general unsecured creditors.

The agent and settling builders said their plan is also supported by South Edge Chapter 11 trustee Cynthia Nelson.

JPMorgan and the settling builders said the unsecured creditors' fund will be established, even though the pre-bankruptcy lenders will not be paid in full and will have a deficiency claim of at least $42.5 million.

Creditor treatment

Specific treatment of creditors under the plan will include:

• Holders of administrative expense claims, trustee loan claims, priority tax claims, gap claims and priority non-tax claims will be paid in full in cash;

• Holders of other secured claims will be paid in full in cash, the rights to their claims will remain unaltered, or they will receive the collateral securing the claim;

• The rights to Local Improvement District T-18 (LID) claims will remain unaltered;

• Holders of pre-bankruptcy secured lender claims will receive a net recovery of between $329.5 million and $339.5 million, funded by cash contributions by the settling builders, a resolved major improvement amount, the settling builders' major improvement makeup, or a combination thereof, and LID reimbursements and other recoveries that may be received by the agent or lenders during the case;

• Holders of pre-bankruptcy lender deficiency claims will share $500,000;

• Holders of general unsecured claims will receive a share of the $1 million general unsecured claim fund; and

• Holders of member claims and equity interests will receive no distribution.

The plan confirmation hearing is scheduled for Oct. 17.

South Edge is a joint venture between KB Home wholly owned subsidiary KB Home Nevada Inc. and a third-party property management firm.

An involuntary bankruptcy case was filed against South Edge on Dec. 9, 2010. The Chapter 11 case number is 10-32968.

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