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

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The case of Hollywood-based TOUSA is emblemati c of how Wall Street threw money at efforts to creatde a nationalhomebuilding company. Unsecured creditors argue that the Wall Streetylenders shouldn’t be allowed to claimj a lot of the valuable assets in TOUSA’zs subsidiaries. The case of Hialeah-based is emblematic of South Florida’s condo conversiohn craze. Creditors argue that lenders were so chummyg with Puigthat ill-conceived loans helped lead to the converter’ss downfall.
Miami-based Ocean Bank, whicyh denies the assertion, has lost $190 milliomn overall in the past twoquarters – but that’s nothing compared to the multibillion-dollar losseas of and some of the other s who lent to TOUSA. TOUSA filed for bankruptcy in January 2008 with morethan $2 billiob in assets and $1.8 billionj in debt, making it the biggest homebuilde bankruptcy in South Florida. The company said recently that it stopped buildiny new homes and is proceeding with anorderlh wind-down of operations.
The best outcomes for the WallStreet lenders, who have first lien claims, would be 66 cents on the dollart from an immediate liquidation of TOUSA although that’s not the company’s current Those holding second lien secured debt and unsecured debt would get nothing, which is partly why they are appealinhg a recent setback in bankruptcy courg to U.S. District Court. “Whilde the goal is for homebuilding operationzs to be absorbed by another companyor investor, as a corporatwe entity would cease to exist under this plan,” the company told the Businesx Journal in an e-mail. In South Florida, TOUS operated under the brand.
“Unless there’s some futurse sale of Engle Homes, there won’g be any new homes built, and it would closde completely atsome point,” lead bankruptcy attorney Natashaq Labovitz, of , said in an She envisions a two-year period to sell assetz under a controlled, orderly process. Leading the list of defendants in the TOUSzA litigation is CiticorpNortuh America. Other defendants are , , Ocean Bank, Credir Products, , , Credit Partners and . Bankruptcuy Judge John Olson recently ruled for the lenderz in dismissing a large part ofthe litigation, but the committeee of unsecured creditors has appealed to U.S.
District Part of the suit has to dowith $500 millio n that was loaned to TOUSA as part of a July 2007 refinancinf of a joint venture involving Transeastern Homes. The unsecuredc creditors argue thatthe $500 million was a “constructivd fraudulent conveyance.” Fees in the Chaptedr 11 case have run into the tens of millione of dollars. Handling the litigation for the unsecured creditors committee is Washington, D.C.-based law firm LLP, whic h stated in a recent fee application that it has requestedf $3.59 million in fees sincd June. A hearing to confirmn the reorganization plan is set for June 22at 9:30 a.m., beforew Judge Olson at the federal courthouse in Fort Lauderdale.
Jeffrey a bankruptcy attorney and law professof atthe , said it is not surprisingg that creditors are pursuing banks for “The reality is, nationwide, that real estate valued are plummeting and it’s particularly difficult if you have a developmeny that’s partially completed,” he TOUSA said it built 3,850 homes in down from 7,824 in 2006. Revenued was $1.1 billion in 2008, down from $2.6 billioh in 2006. In the Puig U.S. Bankruptcy Court Judge Robery Mark recently ruled a lawsuit by creditors that claims morethan $45 milliojn in damages can go forward.
The creditors’ filed in August, alleges that bank loan officers who were friendx with Puig extended the insolvency by makinvgbad loans. The bank movec to dismiss the litigation asbeing unfounded, and wants to convert the Chaptert 11 reorganization to a liquidation. Mark subsequently dismissed some claims, but the most sensationalp survived. The bank’s attorney, Joel said dismissals were a big win for the and he believes itwill prevail.