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Developer will reimburse city close to $500K

As part of its reorganization plan, LandSource will pay for road widening

Posted: July 21, 2009 10:18 p.m.
Updated: July 22, 2009 4:55 a.m.
 

As part of the reorganization of Newhall Land and Farming Co.’s bankrupt owner, Santa Clarita will see the repayment of a nearly half-million dollar construction bill.

The city spent $449,000 widening Newhall Ranch Road between Rye Canyon Road and Dickason Drive, with the promise that Newhall Land would reimburse the city, according to an attorney for the city.

On Monday, a U.S. Bankruptcy Court judge approved a reorganization plan for LandSource Communities Development, LLC, which filed for Chapter 11 bankruptcy protection in June 2008.

As part of the reorganization plan, the developer is paying that construction bill.

“It’s very good news,” said an attorney for the city, who spoke with The Signal on the condition of anonymity.

Had the Chapter 11 case been converted to a Chapter 7 liquidation, the attorney said the city would have been less likely to see that bill paid back.

LandSource will emerge from reorganization as Newhall Land Development.

Lennar Corp., one of the owners of LandSource, announced Monday that the reorganization plan allows the Miami-based home builder to buy about 15 percent of the Newhall Ranch project, along with other properties, for approximately $140 million.

Lennar had a 16 percent stake in LandSource before falling land prices pushed the venture into Chapter 11 protection last June.

When LandSource filed for Chapter 11 protection last year, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclays Bank, which Big Builder magazine reported will remain one of the majority owners.

Creditors in the bankruptcy case — a list that includes multi-million dollars’ worth of local claims — are set to get equity in exchange for the more than $1 billion they were owed.

It remains to be seen how the reorganization plan plays out.

“I just need to see where the dust settled,” said Lou Esbin, Valencia bankruptcy attorney representing several companies that had contracts with Newhall Land and Farming. “Time will only tell whether it was a good or bad economic decision.”

By Monday’s hearing, Esbin said, Judge Kevin J. Carey seemed to have changed his view on the proposed reorganization.

“Are you going to tell me that out of this chaos has arisen order?” Esbin quoted Carey as asking LandSource’s attorneys.

“The judge seemed happy,” he said. “He’d been very doubtful that they’d be able to do anything.

“The devil is going to be in the details as to what the plan actually says.”

 

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