Meruelo Maddux creditors look to file competing reorganization plan

By Caroline Salls

Pittsburgh, July 13 - Meruelo Maddux Properties, Inc. creditors Legendary Investors Group No. 1, LLC and East West Bank have asked the U.S. Bankruptcy Court for the Central District of California to file a competing plan of reorganization, according to a Monday court filing.

"Every constituency, except settled creditors, has opposed the debtors' plan and all contend the debtors' plan to be non-confirmable," the creditors said in the motion.

Legendary and East West said exclusivity has already been terminated for other parties to test the fairness of Meruelo Maddux's plan, but none of them have filed a competing plan.

"It is evident that the debtors will not carry the secured lender classes, will be forced to attempt to confirm their plan via cram down and will necessarily invoke the new value exception to do so," the creditors said in their motion.

Legendary and East West Bank said their proposed plan would ensure more value for stakeholders than under the company's plan "under which creditors are locked into a structure with a great deal more risk and contingencies to their recovery."

Creditor plan terms

Specifically, under the creditors' plan:

• A total of $65 million of secured debt would be converted into equity. The plan also includes a $5 million infusion of new cash;

• Priority and unsecured creditors would be paid in full;

• Secured creditors who have agreed to settlements would be treated in accordance with those settlements;

• Secured creditors who have not settled would "receive terms that exceed those which are proposed in the debtors' plan." Specifically, these creditors would be paid quarterly over four years at a 5% interest rate, with a balloon payment due at maturity; and

• Existing equity holders would receive 20% of the equity in the reorganized company.

Company plan

As previously reported, under Meruelo Maddux's plan:

• Holders of administrative claims and other priority claims will be paid in full in cash;

• Holders of common lender secured claims will be paid in full in cash over a period of five years if they vote to accept the plan or over a period of seven years if they vote to reject it;

• Holders of unsecured convenience claims of $500 or less will be paid in full in cash on the plan effective date;

• Holders of general unsecured claims will be paid in full over five years with 1% interest; and

• Interest holders can receive either $0.08 per share or contribute cash and shares in exchange for new equity.

Meruelo Maddux, a self-managed, full-service real estate company that develops, redevelops and owns commercial and multi-family residential properties, filed for bankruptcy on March 26, 2009. Its Chapter 11 case number is 09-13356.

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