South Edge plan of reorganization confirmed; Nov. 30 effective date

By Jim Witters

Wilmington, Del., Oct. 27 - South Edge, LLC's plan of reorganization was confirmed on Thursday, according to documents filed with the U.S. Bankruptcy Court for the District of Nevada.

The plan consists of a pre-bankruptcy credit agreement, which administrative agent JPMorgan Chase Bank, NA and the settling builders filed for South Edge's bankruptcy case.

The projected effective date for the plan is Nov. 30.

As previously reported, the four settling builder plan proponents are company members and parent affiliates KB Home, Toll Brothers, Inc., Weyerhaeuser Real Estate Co. and Beazer Homes Holdings Corp.

Inspirada Builders, LLC will be the acquiring entity.

The plan enables non-insider creditors to receive substantial distributions within the next few months, ends years of contentious and expensive litigation between the agent and settling builders and creates a platform for future development of South Edge's "Inspirada" master planned community.

The confirmation ruling states that the prepetition lenders will have a claim of about $382 million at the projected effective date. Those lenders will receive about $335 million under the plan, leaving a deficiency of about $47 million.

Creditor treatment

Specific treatment of creditors under the plan will include the following:

• Holders of administrative expense claims, priority tax claims, gap claims and priority non-tax claims will be paid in full in cash;

• Holders of other secured claims will be paid in full in cash, the rights to their claims will remain unaltered, or they will receive the collateral securing the claim;

• The rights to Local Improvement District T-18 (LID) claims will remain unaltered;

• Holders of pre-bankruptcy secured lender claims will receive a net recovery of between $330 million and $340 million, funded by cash contributions by the settling builders, a resolved major improvement amount, the settling builders' major improvement makeup, or a combination thereof, and LID reimbursements and other recoveries that may be received by the agent or lenders during the case;

• Holders of pre-bankruptcy lender deficiency claims will share $500,000;

• Holders of general unsecured claims will receive a share of the $1 million general unsecured claim fund; and

• Holders of member claims and equity interests will receive no distribution.

South Edge is a joint venture between KB Home wholly owned subsidiary KB Home Nevada Inc. and a third-party property management firm.

An involuntary bankruptcy case was filed against South Edge on Dec. 9, 2010. The Chapter 11 case number is 10-32968.

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