William Lyon Homes emerges from pre-packaged Chapter 11 bankruptcy

By Jim Witters

Wilmington, Del., Feb. 27 - William Lyon Homes announced Monday it has emerged from its voluntary pre-packaged Chapter 11 reorganization plan with a "significantly stronger" balance sheet.

The company's plan of reorganization became effective on Feb. 25, according to a company press release.

"The successful completion of the company's recapitalization is a major accomplishment which will help William Lyon Homes to remain a leader in the homebuilding industry for years to come," said CEO General William Lyon.

The company received a capital infusion of $85 million and reduced both the principal amount of its debt and its cash-pay interest expense, significantly strengthening its balance sheet, according to the press release.

Principal debt was reduced by about $180 million, resulting in a 37% reduction in overall debt. Annual cash interest was reduced by about 45% or nearly $25 million, the release states.

"Now that this process is complete we can refocus on executing on our business objectives. The company was able to continue making acquisitions throughout the recapitalization process, and with our new capital structure, we look forward to bringing these and other highly desirable projects to market," said Willliam H. Lyon, chief operating officer and president.

Plan terms

The pre-packaged plan called for the following:

• The Lyon family to invest $25 million in exchange for 20% of the reorganized company's common equity and warrants for an additional 9.1% of common equity;

• The company's senior secured lender to receive a $235 million secured note;

• Senior noteholders to exchange $284 million principal amount of existing notes for $75 million of secured notes and will receive 28.5% of common equity;

• The company to propose a rights offering to be backstopped by one of its largest noteholders for $10 million of common equity and $50 million of new convertible preferred equity, together representing 51.5% of the common equity.

The convertible preferred equity would carry a preferred dividend of 4% cash and 2% payment-in-kind, but the company can pay the entire amount in kind.

The preferred equity would be convertible on a 1 for 1 basis into class C common shares, collectively representing 51.5% of the capital stock of the company; and

• In connection with the exchange and rights offering, the existing equity of the company was to be canceled, and William Lyon Homes issued to the holders of its existing equity, in exchange for a purchase price of $25 million in cash, shares of class B common stock, initially representing 20% of the capital stock, and warrants to purchase an additional 9.1% of the class B common shares at a strike price based on a $325 million equity value of the company.

The Newport Beach, Calif.-based company designs, constructs and sells single family detached and attached homes in California, Arizona and Nevada. The Chapter 11 case number is 11-14019.

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