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alstry (35.70)

Bankruptcies Pouring In Now!!!!

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April 29, 2008 – Comments (3)

LandSource bankruptcy filing expected in May as cash runs out

New York, April 29 (LCD) – LandSource Communities Development is expected to file for bankruptcy within two to three weeks, lenders said today following a private call. A filing would push the default rate in the S&P/LSTA Leveraged Loan Index to 1.25% by principal amount, and to 1.91% by number of issuers.

A depletion of cash will likely prompt the filing next month. The company’s cash pile has dwindled to roughly $25 million, from about $115 million in early February.

http://www.lcdcomps.com/lcdnews/news.pl?tid=prt&newsid=4298202

Empire Land, an Ontario, Calif.-based land development company, filed for bankruptcy protection on April 25 in the Riverside Divisional Office of U.S. Bankruptcy Court in the Central District of California.

"A severe tightening or loss of financing for the entitling and development of land and the resulting pressures that were placed on the debtors' cash flows" resulted in the action, according to a statement made by CFO Neil Miller in court documents.

http://www.bigbuilderonline.com/industry-news.asp?sectionID=363&articleID=696404

A number of public homebuilders are involved in off balance sheet joint venture land development deals.  If the debt was structured on a recourse basis, than the HB would be liable for any default, even if liability is limited to a "bad boy" provision where a joint party files for BK.

We heard about a couple of Vegas defaults a few weeks ago.  The LandSource deal mentioned above is probably one of the most visible CA deals of the past year as it involved a few billion dollars between debt and Calpers equity investment.  Expect to hear about a lot more defaults in upcoming weeks.  The loans on these transactions were syndicated to hundreds, if not thousands of banks.  The fall out from this will be a mess......expect to hear about some public home builder issues in upcoming days and bank problems in upcoming weeks.

Concentric Contraction is just beginning.

3 Comments – Post Your Own

#1) On April 29, 2008 at 8:00 PM, cabuilderboy (86.13) wrote:

The 21st Century version of the S&L crisis. While there will be no RTC, these overleveraged positions will be sold just the same. One man's trash will become another man's treasure, no different than in the 90's. I spend much of my time entertaining large equity funds eagerly wanting to purchase distressed land. Just like the home foreclosures, when the price is perceived to be a bargain, land inventory will begin to liquidate and the market will begin a slow, but eventual recovery. There will be dead bodies along the side of the road, but a new breed of real estate risk takers will prevail.

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#2) On April 29, 2008 at 9:05 PM, alstry (35.70) wrote:

My friend, we have already eclipsed the S&L crisis and we are just beginning.

Every state  and municipality in America is overleveraged right now.  Wait until the munis start defaulting.

Trillions of Commercial RE and Residential RE is over leveraged.

The total S&L crisis was about $250 million.  We are already over $300 million and climbing rapidly.

By the end of this summer, we will likely be seeing 10% plus unemployment as more and more bankruptcies and defaults trigger layoffs.

You are right, there will  be dead bodies along the side of road, and on the road, and under the road, and everywhere you look.

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#3) On April 30, 2008 at 1:13 AM, zygnoda (26.65) wrote:

You are right, there will  be dead bodies along the side of road, and on the road, and under the road, and everywhere you look.

Oh joy!

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