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HomeMy WebLinkAboutPress Release of ReorganizationJUN 03 '91 10: 11 PLA111 zt ENG General Development Corporation 2601 SOUTH ELAYSHORF URVE MIAMI, FLOHOA 33133.5461 (305) Ei59'0000 FOR I MVEDI ATE RELEASE June 3, 1991 CONTACT: Maria Orosa (305) 859-4256 GENERAL DEVELOPMENT CORPORATION AND CREDITORS' COMMITTEE FILE CHAPTER 11 REORGANIZATION PLAN MIAMI, FL -- General Development Corporation (GDC) and the Official Unsecured Creditors' Committee of GDC have filed a proposed joint plan of reorganization with the United States Bankruptcy Court for the Southern District of Florida in accordance with chapter 11 of the U.S. Bankruptcy Code, it was announced today. Commenting on the plan, William J. Perlstein, lead bankruptcy counsel for GDC said, "In stark contrast to the primary alternative liquidation of the company and distribution of those proceeds ----this plan offers by far the better prospect for meeting fairly, to the maximum extent possible, GDC's obligations to claim holders, whether creditors, consumers, or other important interests." Mr. Perlstein said that the proposed plan seeks a balance: a fair allocation to all allowed interests of the resources available to GDC while nurturing the underlying strengths of the Company for the longer term to build value for these very interests. He emphasized that all claims cannot be JUN 83 '91 10:11 PLAT G & ENG • P.5/8 paid in full, since valid claims against GDC greatly exceed the assets Of the Company. He noted that virtually all the common stock of the new company will be distributed to the existing creditors. Existing GDC stockholders will receive no distributions or recoveries whatsoever, and their stock will be cancelled. GDC President and Chief Executive Officer J. Larry Rutherford, who joined GDC in September 1990, five months after GDC petitioned for chapter 11 relief, said, "The plan was fashioned after nearly six months of analysis and discussions by the Company and the members of the Creditors' Committee, who represent institutional creditors, consumers, trade creditors, and others with claims on the assets of GDC. The progress to date has benefitted from the earnest efforts of the Creditors' Committee, together with those of the Company's employees and senior management." The filing is in the form of a joint plan comprising 18 separate classes which take into account the relative priority of the claims in each class based on priorities established by the Bankruptcy Code, contractual subordination provisions, and other relevant characteristics. Under the plan, fully secured, priority, and administrative claims are to be paid in full, either on confirmation or over time with interest. Payments on allowed unsecured claims are to be made in the form of new senior notes to be issued by GDC in an aggregate principal account of $100 million; new cash flow notes totaling 2 JUN 03 191 10:12 PLA G & ENG • P. big an aggregate principal amount Of $100 million; and 9.75 million shares of new common stock, all distributed according to a distribution formula set forth in the plan. There will be no immediate distribution of cash to the General Unsecured Creditor class. Special adjustments reflecting existing contractual subordination provisions or with respect to the provision of new funding to the reorganized Company will be made in the distribution ratio for the new securities. Mr. Perlstein added that estimates of the final aggregate value of these disbursements to any individual creditor or claim holder class could not be made at this time. "Among the difficulties in making such estimates is that the allowance of priority and administrative claims has not yet been determined by the Bankruptcy Court. In addition, the total amount of allowed unsecured claims in aggregate, and by class, is not yet known, so we cannot estimate the distribution to each class of creditors of the new securities.11 Commenting on GDC's financing needs as a going concern, Mr. Rutherford said that the existing debtor-in-possession (DIP) lenders had agreed in principle to extend the current DIP financing through December 15, 1991 and to Finance a new revolving line Of credit for GDC,s general working capital purposes. Under the plan, the DTP loan will be converted to a secured three-year term loan. As a consideration, the new notes to be issued to these bank creditors will be secured and will bear a lower interest rate than the rate to be paid on the nates - 3 - JUN 03 '91 18:12 PLA,x: ENG . P.7/8 to be issued to other creditors. In addition, a portion of the new stock that would otherwise be distributed to these bank creditors will instead be issued to them as notes as part of the $200 million in notes to be issued under the plan. Under the plan, holders of the existing public subordinated notes and of the public junior subordinated notes would receive 706,000 and 200,000 shares of new common stock, respectively. These amounts are subject to adjustment as total unsecured claims are determined. The Company's obligations to homesite purchasers who accept the Company's Homesite Purchaser Assurance Program will be carried out as provided in that Program. Homesite purchasers not accepting that Program will be treated in the General Unsecured Creditor class, as will claims allowed under the Restitution Program for housing purchasers previously approved by the United States District Court. The allowed claims of the State of Florida and local governments arising from development obligations of the company will also be treated as General Unsecured Creditor claims entitled to notes and new common stock. The reorganization plan designates the Creditors' Committee as GDC's representative for the purpose of retaining and enforcing any claims and interests belonging to GDC. Mr. Perlstein said the task of revising and finalizing the plan would continue even after the filing of this plan. "we intend to submit a revised plan, together with a complete - 4 - JUI 1 03 91 10: 13 PLHI it EHG disclosure statement, to the Bankruptcy Court by July 31. The period between now and the revised submission will give members of the creditor population the opportunity to familiarize themselves with the plan and to propose modifications." There are several milestones which must be passed before the Company can emerge from chapter 11. The proposed plan and the disclosure statement when it is prepared will be submitted to U.S. Bankruptcy Judge A. Jay Cristol to determine if they meet the requirements of the federal Bankruptcy Code and are subject to modification by the Court. Also required will be a public hearing on the disclosure statement. Following approval of the disclosure statement, the plan and disclosure statement will be distributed to all parties entitled to vote, prior to a hearing on final confirmation of the plan. Court approval and final confirmation would be the final steps preceding emergence of the company from chapter 11 status. Larry Rutherford said, "I expect the new Company to be a strong community developer committed to producing an affordable, quality product in the Florida markets where we opexate. The filing of the joint plan sets the stage for the eventual emergence of this new business enterprise."