(Carl Cronan is editor of Real EstateFlorida.)
BONITA SPRINGS, FL-In an expected move given the current state of the nation's housing market, WCI Communities Inc. filed for Chapter 11 reorganization under the US Bankruptcy Code on Monday. The company, which is involved in numerous upscale condominium developments throughout Florida, says it plans to operate as usual during its restructuring process.
"The filing became necessary because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default," WCI Chairman Carl Icahn stated in a release. He added that the last straw occurred when holders of the company's $125 million in convertible notes that were due Tuesday rejected an earlier exchange offer that would have paid a higher interest rate in five years.
Among the first management changes to result from the restructuring is the appointment of David L. Fry as interim president and chief executive officer, replacing Jerry L. Starkey, who has served as CEO the last three years. Fry has been with WCI since 1995 and became its chief operating officer last November.
GlobeSt.com previously reported that a buyout or bankruptcy appeared to be the only remaining options for WCI after it dissolved a special committee formed in June to review and evaluate proposals regarding its future, including the possible expansion of Icahn's current 14.5% stake in the company. Bonita Springs-based WCI plans to build 15,000 homes along the East Coast at prices up to $10 million.
Prior to Monday's bankruptcy filing, WCI reached a definitive agreement with principal lenders giving the company access to at least $50 million cash on hand to continue operating on an interim basis, subject to court approval. It also has a proposal by senior lenders to provide another $100 million through a debtor-in-possession loan facility.
"Day-to-day operations will continue as usual, while we work with our stakeholders to restructure the balance sheet," Fry stated. "We will continue to sell, build and deliver homes without interruption. Construction and sales activities will continue; employees will come to work and be paid."
WCI has land positions through Florida, particularly along the Gulf Coast from Tampa to Marco Island, with additional sites in South Florida, Palm Coast, Jacksonville Beach and Perdido Key. Its other developments are primarily within the metropolitan areas of New York City and Washington, DC.
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