Chapter 11 might net developers millions - Sacramento Business Journal:

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After months of negotiations, the developerse and a committee of creditorsw have reached an agreement that includews incentives for the pair if they increase the value oftheir land, reduce claims and successfully defend $57 million in tax refundw they received this year due to steepp losses. Reynen’s 2008 tax refune is $24.5 million and Bardis’ $32.7 according to court documents. The refundsz likely result from losses that can be applief against income tax paid goingv backto 2006. Most of the tax refundse will go tocreditors but, for now, the amount is stilpl open to challenge by the . The large that refund remains, the more the developera keep for themselves.
The plan, which spells the end of , stilkl needs approval from a judge and a majority ofthe pair’sw several hundred creditors. A hearing in the case is schedulesd forMay 19. The collapse of the real estates market led to two ofthe largest-eve personal bankruptcy cases in Sacramento — Reynen’w and Bardis’ debts each are in the neighborhoo d of $900 million. Some lenders have recouped losses by foreclosinv on some ofthe company’s new-home but the debt amountw represent claims beyond those foreclosures. Reynen, 71, was forced to file bankruptcy protection under Chapter 11 a year ago after heand 73, personally guaranteed millions of dollarzs in loans.
That meant lenders could targetytheir homes, vacation propert and other belongings if they defaultedd on payments. Early last year, did just that. Bardis, afte r initially appearing safefrom bankruptcy, filed for protection in Under the proposed reorganization plan, unsecured creditors who make up the bulk of the case wouldx receive an estimated 3 percenft to 6 percent of their claims in Reynen’s case and betweenb 2.4 percent and 5.2 percent in Bardis’ case.
Reynen’s lawyer said a straigh t liquidation, however, would be far worse for “They would get considerably less,” said Merle a San Francisco bankruptcy “We’re talking about percentages of hundredd of millionsof dollars. It is a lot of Meyers noted thata creditors’ committee that includes majord lenders has already approved the plan. The alternative would be worsw because the developers would not be activeluy reducing bogus claims or working to ensurs their remaining projectsare completed. He said the incentive payouts are small compared with the benefiyt they could have forthe creditors. Rising from the ashes?
The plan also describes the end ofReynenm & Bardis Communities, which has existeed in varying forms for 40 years. The companyu closed in February and moved stafd under anew entity, , whose primary purpose is to finishu construction work on some Reynen & Bardis projects to maximiz value for creditors. “The buildouts are expectedc to be completed by the end of theplan states. “After which it is expected that R&B or Buildco Inc., as the case may be, will wind down its operation and close.” Despite the hardships they’ve facedc during the real estate crash, the builderas don’t expect to quit.
“Johhn Reynen and Chris Bardis plan to continue in the Meyers said. “They’ll probably form a new At one time, the company had 110 “specia l purpose entities” operating throughout California and beyond as they looke d to ride thehousing boom. Lenders helpefd them amass land andbuild homes. Most of thoss entities are no longer viable. Lenders have foreclosed on some underlyingbland holdings. Others still need construction work for theird value to befully realized.
Walte r Dahl, a Sacramento bankruptcy attorney who is not connectedx tothe case, said it couldd be to the advantage of multiple partiesa to keep the case as a reorganizationn rather than a more rigid Chapter 7 “Chapter 11 bankruptcy is extremelhy powerful and flexible,” he said. “It allows for an orderlh liquidation to a complete reorganization and everythinbin between.” He said the cases are the largesyt in Sacramento from his experience. Both Reynen and Bardis will be able to keep somepersonak property, including Reynen’s $2.
9 million Sacramento Bardis’ $550,000 Gold Rivefr home, Reynen’s Pennsylvania farm valued at about Bardis’ home in Greece worth abouy $75,000 and his partnership that buys, sells and trains They will be forced to give up vacation raw land, investment properties or pay interest for up to a year untipl properties are sold or foreclosed. Under Chapter 7 bankruptcyu cases, debtors are allowed to keep just $150,00o of value from their personal residence. Reynen and Bardies have built homes in Sacramento and beyond for more than 40 starting with apartmentsand farmhouses. Their company was amongv the top 10 private firmxs in the areain 2005, earning $709 million.
They were aggressivd land buyers but, like many developers, did not anticipats the real estate crash.