WL Homes objects to creditors committee request to convert case to Chapter 7

By Jennifer Lanning Drey

Portland, Ore., May 14 - WL Homes, LLC objected to its official committee of unsecured creditors' motion asking the U.S. Bankruptcy Court for the District of Delaware to convert the company's Chapter 11 bankruptcy case to Chapter 7 for liquidation, according to a Wednesday filing.

The creditors claim WL Homes' reorganization efforts exist only for the benefit of insider pre-petition lender and corporate parent, Emaar America Corp.

In Wednesday's filing, WL Homes said that since the committee filed its motion, WL Homes has negotiated significantly better terms with proposed asset purchaser Emaar.

Specifically, WL Homes said under the revised proposal, Emaar has agreed to subordinate the recovery of general unsecured creditors their approximately $407 million of unsecured claims, which based on current estimates would result in a three-fold increase in the recovery for general unsecured creditors.

Also under the new asset purchase agreement, the cash portion of the price will be reduced to $7 million from $8 million but is not longer subject to any deductions for cure costs.

In addition, Emaar has agreed to assume up to $11 million in outstanding principal amounts under the debtor-in-possession financing agreement, which is up from $8 million in the original agreement.

At the same time, the break-up fee was lowered to $200,000 from $2 million.

"Conversion of these cases will eliminate the going concern value differential offered by the revised [Emaar] proposals as well as a two-thirds reduction in general unsecured claims and any ability to negotiate a reduction of bank deficiency claims," WL Homes said.

WL Homes, an Irvine, Calif.-based homebuilder, filed for bankruptcy on Feb. 19. Its Chapter 11 case number is 09-10571.

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