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Aristotle
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Joined: 05 Dec 2007
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Location: On a sand dune, sipping a cold soda

SunCal Files 14 Voluntary Chapter 11's, Blames Lehman
PostPosted: Sat Nov 08, 2008 10:01 am Reply with quoteBack to top

Both the L.A. Times and Sacramento Bee are carrying stories today, November 7th, cited below, indicating that separate SunCal entities filed Chapter 11 bankruptcies today (and yesterday) in the U.S. Bankruptcy Court for the Central District of California, Santa Ana branch.

In fact SEVEN (7) SunCal entities filed voluntary Chapter 11 petitions on 11/6-7/08 in that court:

SunCal Beaumont Heights LLC - Case 8:08-bk-17209-ES

SunCal Bickford Ranch LLC - Case 8:08-bk-17231-ES

SunCal Communities I, LLC - 8:08-bk-17248-ES

SunCal Communities III, LLC - 8:08-bk-17249-ES

SunCal Emerald Meadows Ranch, LLC - 8:08-bk-17230-ES

SunCal Johannson Ranch, LLC - 8:08-bk-17225-ES

SunCal Summit Valley, LLC - 8:08-bk-17227-ES

All seven of the new cases were assigned to Bankruptcy Judge Erithe Smith, who is already the judge assigned to the 4 involuntary cases filed against the SunCal managed, Lehman Brothers Real Estate Partners, LP owned and dominated entities (to the extent of 85%). Those involuntary cases were filed by junior mortgagees and mechanics lien claimants. Just last week, Judge Smith appointed Alfred Siegel of Sherman Oaks, California as Chapter 11 Trustee in the four involuntary cases.

In addition, 7 other SunCal controlled entities, which don't have the word "SunCal" in their names, filed Chapter 11 bankruptcies in the same court, also on 11/6-7/08. For detail see the Implode-O-Meter Forum post "SunCal Reluctantly Declares War on Lehman". That means there are a total of 14 SunCal related cases where a Lehman entity is the mortgage lender, but not a controlling owner.

Prior to her appointment to the Bankruptcy Court bench in 1994, Judge Smith was a well known Chapter 11 debtors' lawyer practicing in Orange County.

What is different with these 14 new cases is that they were filed by the debtors. Particularly humiliating was the need for SunCal's owner, Bruce Elieff, to personally sign the limited liability company resolutions required by the Bankruptcy Court, in his capacity as Manager of the new debtor LLCs, documenting that proper internal procedures had been followed authorizing the filing of the LLCs' bankruptcy cases.

In each of these 14 new SunCal bankruptcy cases, the court files disclose that the debtors are represented by Paul J Couchot, Esq., Winthrop Couchot PC, 660 Newport Ctr Dri Ste 400, Newport Beach, CA 92660
949-720-4100, Fax : 949-720-4111, Email: pcouchot @ winthropcouchot.com. Winthrop Couchot is a small bankruptcy law firm, solely composed of experienced debtors' lawyers, and known for offering Chapter 11 debtors counsel legal services at reasonable hourly rates.

Apparently, SunCal has a new spokesman concerning these bankruptcies. See today's Los Angeles Times Article at:

http://www.latimes.com/busines.....4508.story

In that article, dealing with the now defunct Bickford Ranch project in Placer County, California, the Times said: "The failure of Lehman Bros. "has created a situation that stands in the way of any new capital coming into the project," said David Soyka, a SunCal spokesman. "Without additional funds, we cannot complete infrastructure elements, implement storm water control measures, care for seedlings and generally maintain the property."

The Sacramento Bee highlighted another feature of the Bickford Ranch project, reporting that it had been a profoundly politically unpopular project. See:

http://www.sacbee.com/static/w.....16838.html

Swallowing SunCal's public relations spin hook, line and sinker, The Sacramento Bee also that: "SunCal said the bankruptcy filing, which seeks protection from creditors, is only for its Bickford Ranch limited liabiilty firm. It does not apply to SunCal itself." Obviously, that statement is patently untrue in light of the simultaneous filing of 14 SunCal entity bankruptcies in the same court.

See: http://www.sacbee.com/749/story/1380119.html

http://www.sacbee.com/142/story/1380689.html

Swallowing that same line that the bankruptcy filing only relates to Bickford Ranch, the Sacramento Business Journal also reports:

"The company said the action follows the bankruptcy of Lehman Brothers, which has been the sole source of funding for the Bickford Ranch project. SunCal said in a news release that despite repeated efforts, “Lehman has provided no meaningful response to funding requests and appears to be either unwilling or unable to fulfill its obligations ... Lehman’s lack of action has effectively starved the development of the capital it needs to pay consultants and contractors, be a good neighbor to nearby residents, perform on-site maintenance and adhere to applicable health and safety regulations.”

See: http://www.bizjournals.com/los.....a=from_rss

In fact, California is full of SunCal projects where construction has stopped and mechanics lien claimants are screaming for payment, including one in San Clemente and one in Castaic, which at first blush do not appear to be included in these new SunCal bankruptcies. However, review of the 14 new bankruptcy files, and an important declaration filed by the debtor's lawyer Paul Couchot, makes it fairly apparent that the projects where there are "big" mechanics lien problems are projects where a Lehman controlled entity is part of the ownership structure, and apparently is unwilling to voluntarily file Chapter 11 cases.

It is also unclear whether it is both bankrupt and not-bankruptcy Lehman entities which have failed to complete funding of SunCal development projects. An investigation by the Orange County Register disclosed that a non-bankrupt entity, Lehman ALI, was the lender on the San Clemente project. In addition, Lehman Brothers Real Estate Partners, L.P., the indirect owner of the Lehman interests in some of the SunCal projects, is not a Chapter 11 debtor in Lehman Brothers Holdings, Inc.'s consolidated Chapter 11 bankruptcy in the Southern District of New York.

Careful reading of the documents filed yesterday today, and those filed later in each case, may disclose more precise details about which Lehman entities were involved in each bankrupt project, and whether or not those Lehman lenders and equity investor entities are bankrupt themselves.

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Aristotle

As Yogi Berra said "It's like deja vu all over again."

Last edited by Aristotle on Sun Nov 09, 2008 1:12 am; edited 3 times in total
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Aristotle
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Joined: 05 Dec 2007
Posts: 594
Location: On a sand dune, sipping a cold soda

It's Actually 14 New Chapter 11 Bankruptcies for SunCal
PostPosted: Sat Nov 08, 2008 9:22 pm Reply with quoteBack to top

In addition to the 7 voluntary Chapter 11 bankruptcies, with the name "SunCal" in them, there are 7 more SunCal managed, Lehman financed entities which filed bankruptcy in the Santa Ana branch court. The lead case was filed on 11/6/08. The debtors have filed a motion, detailed in a separate post, requesting that all 14 of the Chapter 11 cases be administered as related cases under the following case number and caption:

In re: Palmdale Hills Property, LLC - Case 8:08-bk-17206-ES

The other Chapter 11 cases concurrently filed, without "SunCal" in their name are:

SCC/Palmdale, LLC - 8:08-bk-17204-ES
Acton Estates, LLC - 8:08-bk-17236-ES
Seven Brothers, LLC - 8:08-bk-17240-ES
SJD Partners, LTD - 8:08-bk-17242-ES
SJD Development Corp. - 8:08-bk-17249-ES
Kirby Estates, LLC - 8:08-bk-17246-ES

The lead case, and the most interesting one with the "different name" debtor is Palmdale Hills Property, LLC, owner of the previously bankrupt Ritter Ranch in the City of Palmdale, California. The Antelope Valley Press has an interesting story about the sad history of that project, and the effects of this new Chapter 11. See: http://www.avpress.com/n/08/1108_s1.hts

Palmdale Hills Property, LLC bought the Ritter Ranch, and its rights under an important water supply agreement, from the Chapter 11 Trustee in the U.S. Bankruptcy Court for the Central District of California, Woodland Hills Branch, the Hon. Geraldine Mund presiding, in Case No. 1:98-bk-25043-GM, In re: Ritter Ranch Development, LLC.

In addition to buying the Ritter Ranch and its water service agreements from the Chapter 11 Trustee, Palmdale Hills Property, LLC and its affiliate privately bought all of the first lien public improvements bonds for the project, called "Senior Bonds Issued by the City of Palmdale Community Facilities District 93-1". As a result of Ritter Ranch LLC's default on those Senior Bonds, as well as Subordinate Bonds held by third parties, the City of Palmdale, Palmdale Hills Property, LLC and SCC Acquisitions, LLC (another SunCal entity) became enmeshed in litigation against the bond issuer, Community Facilities District 93-1, filed by the holders of the Subordinate Bonds aka junior lien public improvement bonds.

At the end of the Ritter Ranch LLC bankruptcy case, after it already owned Ritter Ranch, Palmdale Hills Property, LLC filed a pleading in the Ritter Ranch LLC bankruptcy case, Document 749, saying "Palmdale [Hills Property, LLC] is the current holder of the Senior Bonds in connection with debtor's Mello Roos financing...the Subordinate Bondholders are not entitled to be paid by the City...the City is only obligated to remit its collection of Special Taxes to the fiscal agent for the Subordinate Bonds...the Fiscal Agent Agreement requires that the Senior Bonds held by Palmdale [Hills Property LLC] be paid before the Subordinate Bonds."

Neither the Ritter Ranch, LLC bankruptcy file nor the Palmdale Hills Property, LLC bankruptcy file disclose whether the Senior Bonds (owned by some SunCal affiliate) or the Subordinate Bonds (owned by the unhappy third party bondholders) are still unpaid.

So now, if those Mello Bonds are still unpaid, as property owner Chapter 11 Debtor Palmdale Hills Property, LLC is the party who is supposed to be paying the Special Taxes to the City of Palmdale, so that they can be forwarded to that fiscal agent for the Senior Bond holders and Subordinate Bond holders.

I am posting a separate topic, tentatively called "SunCal Reluctantly Declares War on Lehman", which details the current state of the relationship between SunCal and Lehman, by quoting from an Emergency Motion filed in this new "lead case", the Palmdale Hills Property, LLC case.

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Aristotle

As Yogi Berra said "It's like deja vu all over again."
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Aristotle
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Joined: 05 Dec 2007
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Names and Locations of New Lehman-as-Lender Projects in BK
PostPosted: Wed Nov 12, 2008 9:15 am Reply with quoteBack to top

The Bakersfield Californian has taken the trouble to figure out the marketing names and sizes of the projects being developed by the 14 newly bankrupt SunCal entities.

See: http://www.bakersfield.com/102/story/606916.html

A review of the creditor mailing matrix on each of the 14 new bankruptcy cases discloses that some projects are financed by Lehman ALI, Inc., which is not believed to be a bankruptcy debtor itself, while other projects list only Chapter 11 debtor Lehman Brothers Holdings, Inc. as lender.

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Aristotle

As Yogi Berra said "It's like deja vu all over again."
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