Palm Coast, Florida – July 2, 2008 – Well funded private developers are not immune from the cash flow problems already exhibited by higher profile public companies like WCI Communities. On Monday, Palm Coast, Florida's largest developer, Ginn Clubs and Resorts, missed principal and interest payments on its first- and second-lien debt, according to an LCD (division of S&P) report issued yesterday and emailed to me by two separate GoToby.com readers.
I contacted both the source for verification of its authenticity and the Ginn Company for their comments. Both the report and a statement from Ginn's president follow:
The Report States:
New York, July 1 (LCD) - Ginn Clubs & Resorts missed principal and interest payments yesterday on its first- and second-lien debt, sources said.
Interest payments are subject to a three-day grace period, but there's no grace on the principal, sources noted. Lenders have agreed to forebear from exercising remedies for 30 days, but haven't waived the default. Ginn's loans are in the Standard & Poor's/LSTA Index.
As part of the forbearance agreement, Lubert-Adler is kicking in $5 million of equity that will be used for operations, according to market sources. It will not be used to make payments on the Credit Suisse-led loans.
The company has already been in active talks with lenders regarding a restructuring of the company's $675 million credit facility. Those negotiations are ongoing, sources added.
Ginn's first-lien debt is quoted at 45/50 this morning, with the second-lien at 10/20, sources said. There was a small trade in the first-lien last week near 50 and the paper has been quoted at 47.5/52.5 since then. The second-lien loan was not active, quoted at 17.5/22.5 last week, down from 35/45 in early June.
The loans back the development of five communities by the Celebration, Fla.-based company. The properties are Tesoro, a mature community in Port St Lucie, Fla.; Quail West, a mature community in Naples, Fla.; Hammock Beach River Club in Palm Coast, Fla.; and the Laurelmor and Grand Bahamas projects, both of which include golf courses and single-family and condominium homes.
The following statement was received from Ginn President, Robert Gidel:
Today, Standard & Poor’s will release a statement that indicates two Ginn affiliated companies, Ginn-LA CS Borrower, LLC and Ginn-LA Conduit Lender, Inc. did not make a principal and interest payment on a non-recourse $675 million credit facility led by Credit Suisse. It will also state that we have reached a 30-day forbearance agreement and are actively negotiating with our lenders.
There are four communities involved in this credit facility:
Ginn-LA St. Lucie, Ltd., LLLP, which owns Tesoro
Ginn-LA Quail West, Ltd., LLLP, which owns Quail West
Ginn-LA Laurel Creek, Ltd., LLLP, which owns Laurelmor
Ginn-LA West End Limited, which owns Ginn sur Mer
Due to the ongoing slowdown in the residential real estate market, it became clear that it would not be possible to meet the homesite sales objectives necessary to make payments due under the credit facility.
We have been discussing these issues with the lenders for the purpose of seeking ways to restructure the terms of the credit facility. Today’s announcement of the forbearance provides an environment for both us as borrowers and the lenders to continue to work toward a restructuring of the credit facility, which we believe will occur in the next 30 days and will permit each of the communities to be completed as planned.
Even though sales throughout our industry have been lagging, nearly all development work has been completed at Tesoro and Quail West. While there is work left to do at Laurelmor, we have commenced work on much of the infrastructure, including the paving of miles of roadway and substantially completing the delivery of water and electric to the homesites.
Ginn-LA West End Limited previously set up accounts which contain the funds necessary to complete the infrastructure and the initial 18-hole golf course at Ginn sur Mer. These funds are not subject to the credit facility and are unaffected by the current situation, which means there will be no disruption to the continued development of the Ginn sur Mer project or the operations and development of Old Bahama Bay. The properties that are owned by Ginn-LA OBB, including the resort core of the Ginn sur Mer project, are not subject to this or any other credit facility.
The Credit Suisse-led credit facility only affects these four communities. All of our other communities, including Reunion Resort & Club, Hammock Beach, the Conservatory, Bella Collina, Old Bahama Bay, Tesoro Preserve and Cobblestone Park, are separately funded and will maintain operations in accordance with business demands.
This situation has no impact on our ongoing business operations throughout the company. In fact, we are creating new initiatives to create better experiences for our Members as we speak. We recently announced the formation of the Ginn One Club, which will provide reciprocity to our Members at select Clubs and Resorts throughout our portfolio.
In addition, we are finalizing plans to complete amenities at our Clubs and Resorts including an expansion of the Waterpark at Reunion Resort & Club which will feature a Members-only area, expanding our pool and food and beverage venues at the South Tower Plaza at Hammock Beach, completing the lobby area and tennis pro shop at Yacht Harbor Village, completing the Social and Equestrian center at Bella Collina and finishing the Clubhouse at Cobblestone Park, among other projects.
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