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At Cadwalader, we believe that the truest measure of our success is the success of our clients. Our case studies provide insight into how we help our clients deal with challenges and seize opportunities in restructuring real estate investments: Centro
Cadwalader represented JP Morgan Chase Bank, N.A. (“JPMCB”), as lender and agent for a syndicate of four other US banks under an unsecured bridge loan facility in the original principal amount of approximately US $2.5 billion, made in April of 2007 to Super LLC (“Super”). Super is a US subsidiary of Centro Properties Group (“Centro”), one of the largest owners and managers of shopping centers in Australia. The bridge loan financed in part Centro’s acquisition of New Plan Excel Realty Trust, Inc. (“New Plan”), a public real estate investment trust holding interests in a large portfolio of US-based shopping centers. The acquisition enabled Centro to become the fifth largest shopping center landlord in the US.Centro planned to refinance the bridge facility with the proceeds of commercial mortgage-backed securities (“CMBS”) loan borrowings by its newly-acquired shopping center owing subsidiaries. However, the severe downturn in the CMBS market required Centro and its lenders to restructure the Super bridge facility together with all other maturing debt obligations of Super, Centro, and their US and Australian affiliates. Since December of 2007, Cadwalader has represented JPMCB in extensive negotiations with the major stakeholders in the US and Australia, seeking a global restructuring of Centro and its related companies that will maximize creditor recoveries. Cadwalader’s restructuring efforts have focused on the following issues: Negotiating standstill agreements and extensions of maturity rates to preserve the status quo, avoid loan maturities during the standstill periods and prevent fire sales of Centro’s assets; Negotiating an $80 million liquidity facility to fund US operations during the workout period, extended by the US lender group and secured by a shopping center property known as The Centre at Preston Ridge, located in Frisco, Texas; Negotiating a bridge loan financing by the Australian lenders in the principal amount of approximately AU $44 million to finance the liquidity needs of Centro’s Australian operations during the extension period; Negotiating a liquidity financing by the Australian lenders in the principal amount of approximately AU $138.26 million; Obtaining mortgages to secure the Super bridge loan in the amount of approximately US $350 million from numerous US property-owning subsidiaries of Centro in exchange for an extension in the maturity date of the Super bridge Loan; Obtaining subordinate liens on more than $1 billion in assets of Centro’s Australian parent company to secure the Super bridge loan; Structuring asset sales to improve liquidity and generate cash to satisfy obligations owed to lenders in the face of the steady deterioration of the commercial real estate market; Negotiating of the terms of asset dispositions and the allocation of proceeds among the US and Australian lenders.
The negotiation process required the coordinated efforts of Cadwalader’s real estate, financial restructuring and tax attorneys seeking a consensual workout of Centro’s diverse portfolio of real estate assets. The Centro restructuring resulted in the two-year extension of the Super bridge facility and other US facilities and the three-year extension of Australian facilities and private placement notes. The parties agreement on the restructuring enabled Centro to continue operating in the ordinary course of business despite significant challenges imposed by the current credit environment. Foreclosure by Loan Servicers
Cadwalader recently coordinated the successful foreclosure of a securitized senior participation interest in a mortgage loan, resulting in the pre-petition senior lenders purchasing a distressed hotel in bankruptcy and preserving the value of their debt investment. Cadwalader represented the special servicer (the “Servicer”) with respect to the foreclosure on the operating hotel property (the “Hotel”). The foreclosure was stayed by the commencement of the case of Chicago H&S Hotel Property, LLC (the “Debtor”) in the Northern District of Illinois Bankruptcy Court. The Servicer successfully credit bid the interests of the securitization trust bondholders and junior participation holders at the auction of the Hotel conducted as part of the bankruptcy case and acquired the Hotel on behalf of the securitization trust.Prior to bankruptcy, the Hotel served as collateral for a $100.7 million CMBS mortgage loan. The equity in the Debtor secured a $27.3 million mezzanine loan. Pre-bankruptcy, Cadwalader represented the Servicer in coordinating the interests of the securitization trust bond holders, the holders of junior participation interests, the mezzanine lender and other parties with an interest in maintaining the value of the Hotel during multiple events of default by the borrowers. Cadwalader successfully advised the Servicer regarding its rights and duties under the multitude of complex documents effectuating the securitization of the Hotel, including documents such as a pooling and servicing agreement, a participation agreement, an intercreditor agreement.In March of 2007, the mezzanine borrower filed for chapter 11 protection to prevent foreclosure of the mezzanine loan. In October of 2007, the mezzanine lender was the successful bidder at a public auction for the equity collateral under the mezzanine loan held in the mezzanine borrower’s bankruptcy case. The mezzanine lender then caused the Debtor to file for chapter 11 protection in violation of the intercreditor agreement.In January of 2008, the Debtor held an auction of the Hotel. Cadwalader devised a strategy enabling the Servicer to foreclose on and win control of, the fee interest in the Hotel by credit bidding at the auction the pre-petition claims of the securitization trust bondholders and junior participation holders. Simultaneous with the foreclosure, Cadwalader created a new special purpose entity to hold the fee interest in the Hotel and to permit the operation of the Hotel by a third party management company.Cadwalader advised the Servicer regarding its obligations with respect to federal, state and local laws affecting the Hotel and the process by which the Servicer could take possession of and hold the Hotel as a REO property. Cadwalader also advised the Servicer regarding the future liquidation of the Hotel so as to satisfy the investments of both the securitization trust bondholders and the junior participation holders and to comply with the terms and conditions of the documents governing those investors’ respective interests. Cadwalader’s real estate and financial restructuring groups extensively coordinated in this matter, devising and executing the winning strategy that enabled the Servicer to foreclose on and gain control of the Hotel, thus preserving the value of the securitization trust bondholders’ and the junior participants’ debt investment. LandSource
In the midst of the credit crisis, Cadwalader successfully negotiated a new debtor-in-possession (“DIP”) financing facility with LandSource Communities Development, LLC and its debtor affiliates in chapter 11 cases filed in the Delaware Bankruptcy Court in June 2008. A joint venture between Lennar Corporation, LNR Property Corporation and MW Housing Partners II, L.P., LandSource is a large and diversified land development company, owning and managing property in six states. The DIP facility refinanced LandSource’s pre-petition senior debt.Prior to the bankruptcy filing, Cadwalader represented the administrative agent to the first lien lenders. LandSource borrowed approximately $1.44 billion in February of 2007, consisting of approximately $1.2 billion in first lien financing and $244 million in second lien financing. By late 2007, the value of the real estate securing these loans had declined to the point that LandSource was in default of its loan-to-value covenants.On behalf of the pre-petition first lien lenders, Cadwalader led the effort to restructure these loans out of court. During the first quarter of 2008, extensive negotiations took place against the backdrop of continuing declines in the value of real estate and continuing uncertainty in the credit markets. Although the parties came close to a resolution, by mid-April of 2008 the negotiations had failed and the focus turned to a potential bankruptcy filing. Cadwalader then represented the administrative agent in negotiating an innovative DIP financing package for LandSource. These complex negotiations required the coordination of Cadwalader’s financial restructuring, real estate, tax and other groups. Ultimately, Cadwalader negotiated a DIP financing agreement that included: A $135 million new revolving loan to provide liquidity to LandSource; The deemed refinancing, or “roll-up”, of the pre-petition first lien senior secured financing into the post-petition secured financing.; Required sales of certain LandSource assets to pay down the DIP revolver; The appointment of chief restructuring officers who will take over the management of LandSource if the company is unable to propose and confirm a plan of reorganization acceptable to the lenders within a fixed period of time; and Limitations on the ability of LandSource to retain the exclusive right to file a bankruptcy plan of reorganization.
The Delaware Bankruptcy Court approved this DIP financing on an interim basis as part of the first day hearings. However, both the second lien lenders and the Unsecured Creditors Committee appointed in the LandSource bankruptcy raised objections to the financing. Cadwalader led the negotiations to resolve these objections under the time pressure created by LandSource’s liquidity problems. The negotiations resulted in a consensual order that the Bankruptcy Court approved in late July of 2008. The matter has required extensive integration between Cadwalader’s financial restructuring and real estate groups. Those groups will continue to coordinate with respect to any future asset sales, plans of reorganization and other developments in the bankruptcy case.
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