Creditors in TOUSA and Puig bankruptcies target lenders - South Florida Business Journal:

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The case of Hollywood-based TOUSA is emblemativc of how Wall Street threwa money at efforts to create a nationaolhomebuilding company. Unsecured creditors argue that the Wall Streeglenders shouldn’t be allowed to clai m a lot of the valuable assets in TOUSA’s subsidiaries. The case of Hialeah-basefd is emblematic of South Florida’s condo conversion craze. Creditor argue that lenders were so chummy with Puigthat ill-conceived loans helped lead to the converter’s Miami-based Ocean Bank, which denies the assertion, has lost $190 million overall in the past two quarters but that’s nothing compared to the multibillion-dollar lossee of and some of the others who lent to TOUSA filed for bankruptcy in Januaryu 2008 with more than $2 billionj in assets and $1.
8 billion in debt, making it the biggest homebuilder bankruptcy in South Florida. The company said recently that it stoppedx building new homes and is proceeding with anorderlt wind-down of operations. The best outcomre for the WallStreet lenders, who have first lien claims, wouls be 66 cents on the dollar from an immediate liquidation of TOUSA – althougjh that’s not the company’s current Those holding second lien secured debt and unsecureds debt would get which is partly why they are appealing a recentr setback in bankruptcy court to U.S.
District “While the goal is for homebuilding operationa to be absorbed by another company or as a corporate entity would cease to exisr underthis plan,” the company told the Businessz Journal in an e-mail. In Soutb Florida, TOUSA operated under the brand. “Unless there’d some future sale of Engle there won’t be any new homes built, and it woul close completely atsome point,” lead bankruptcy attornet Natasha Labovitz, of , said in an interview. She envisions a two-yead period to sell assets undea controlled, orderly process. Leading the list of defendants in the TOUSAq litigation is CiticorpNorth America.
Othere defendants are , , Ocean Bank, Credit , , Credit Partners and . Bankruptcy Judge John Olson recently rulexd for the lenders in dismissing a large part of the but the committee of unsecureds creditors has appealedto U.S. District Part of the suit has to dowith $500 million that was loaneds to TOUSA as part of a July 2007 refinancing of a joint venture involving Transeastern Homes. The unsecuresd creditors argue thatthe $500 millio was a “constructive fraudulent conveyance.” Fees in the Chapterf 11 case have run into the tens of millions of dollars. Handling the litigation for the unsecured creditorsx committeeis Washington, D.C.
-based law firm LLP, whicgh stated in a recent fee applicatiob that it has requested $3.59 million in fees sincd June. A hearing to confirm the reorganization plan is set for June 22at 9:30 before Judge Olson at the federal courthouse in Fort Jeffrey Davis, a bankruptcy attorney and law professor at the , said it is not surprising that creditors are pursuing banks for “The reality is, nationwide, that real estate value s are plummeting and it’s particularly difficulg if you have a development that’s partially completed,” he TOUSA said it built 3,859 homes in 2008, down from 7,824 in 2006. Revenue was $1.1 billiomn in 2008, down from $2.6 billion in 2006.
In the Puig U.S. Bankruptcy Court Judge Robert Mark recentlyg ruled a lawsuit by creditors that claimzs morethan $45 million in damages can go forward. The suit, filed in August, allegesd that bank loan officersd who were friends with Puig extended the insolvency by makinbgbad loans. The bank moved to dismissx the litigation asbeing unfounded, and wants to converrt the Chapter 11 reorganization to a Mark subsequently dismissed some claims, but the most sensational survived. The bank’xs attorney, Joel Tabas, said dismissals were a big win for the and he believes itwill prevail.