By HARRY EAGAR, Staff Writer
reprinted courtesy Maui News 1/13/09
Construction did not stop at the Residences at Kapalua Bay after one of its
major lenders, Lehman Brothers, declared bankruptcy in September. Now, Maui
Land & Pineapple Co. and its partners in the $370 million project have an
agreement to restructure financing, including $55 million from two German banks
to replace what Lehman would have provided. The deal must be approved by the
U.S. Bankruptcy Court in New York.
KAHULUI - Maui Land & Pineapple Co. and its partners in the Residences at Kapalua Bay have found new lenders to replace Lehman Brothers, which declared bankruptcy in September.
The restructuring of $120 million to complete the $370 million project will need the approval of the U.S. Bankruptcy Court in Manhattan, N.Y. But the unsecured creditors have stipulated to the deal, so it likely will be approved Jan. 28, when the matter will be heard.
Most of the money will come from lenders or investors who participated in the original package, but two German banks will bring $55 million of new money to replace commitments that Lehman cannot fulfill.
On Monday, ML&P President Rob Webber said: "It is a good result for the company," because it establishes clearly that the luxury project will finish on time at midyear.
How fast units then will sell remains uncertain, although Webber says there was strong interest in the Residences from attendees at the Mercedes-Benz Championship golf tournament over the weekend. Now everything will depend on whether buyers can find credit.
Webber expects 2009 to be a challenge for the company, but at least when the luxury resort real estate market comes back, Kapalua should be well set to take advantage. Other waterfront projects at Ko Olina on Oahu and on Kauai have suspended construction.
According to the agreement filed in the Southern District of New York, Lehman Brothers Holdings Inc. created a construction-loan package that was to have been released in six pulses. Lehman kept $270 million of the deal for itself, spreading the rest among Central Pacific Bank and three European banks.
Most of the money had been handed out when Secretary of the Treasury Henry Paulson in September declined to offer a financial-rescue package to Lehman, one of the country's biggest investment firms. Lehman filed for bankruptcy Sept. 15, leaving ML&P, Marriott International and their general contractor, Nordic PCL, holding the bag for continuing charges.
ML&P was stunned and, having absorbed large losses, not comfortably fixed to keep the project going with its own funds. However, it and its joint- venture partners did so, and Webber says the construction work never paused during the tense months when the partners sought replacement financing.
Webber and David Cole, who was chairman until Jan. 1, expressed confidence from the start that ML&P would find new money, but it was not obvious where, since big banks and similar sources of money were begging the government for cash but then hoarding it themselves.
In the restructuring, Central Pacific Bank will become the administrative agent for the new loan package. CPB is a $20 million participant, and it funded the first pulse of the construction.
Most of the remaining money will be $35 million from Lehman Brothers Holdings Inc.'s estate in bankruptcy, and $55 million in new commitments from two German banks: Deutsche Hypothekenbank and Landesbank Baden-Wurttemberg. Another early participant, Swedbank, will maintain its $20 million share, and Marriott will up its original $17 million investment by another $10 million.
The joint-venture partners and the original banks had advanced a total of $19 million to keep construction going since September.
The project, which occupies the site of the former Kapalua Bay Hotel, will have 146 residences, 84 to be sold individually as The Ritz-Carlton Residences, and the remainder as fractions in The Ritz-Carlton Club.
* Harry Eagar can be reached at heagar@mauinews.com.
reprinted courtesy Maui News 1/13/09, original link www mauinews.com/page/content.detail/id/513595.html?nav=10
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