WCI Receives Approval on Package of Relief that Assures Continued, Uninterrupted Operations
Immediate Use of $50 million in cash collateral is approved for Hammock Dunes condominium developer.
Palm Coast, Florida – August 6, 2008 – A US Bankruptcy Court approved a relief package for Bonita Springs-based developer, WCI Communities according to a statement released by the company Tuesday. The ruling by the Federal Bankruptcy Court in Wilmington, Delaware is designed to facilitate and ensure the continued and uninterrupted operation of WCI’s business. Importantly, the Court assured current and prospective homebuyers that WCI’s Chapter 11 proceedings would not impact their rights or create any unexpected risks by, among other things:
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Authorizing WCI to deliver clear title to homes and tower residences at closing;
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Authorizing and directing all closing agents and title companies to make all required closing payments and distributions;
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Authorizing the issuance of required title insurance policies;
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Determining that deposits and other funds received and held in trust were not subject to the bankruptcy and are to be applied only according to the parties’ agreements and applicable law; and
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Providing for the satisfaction of any liens and implementing procedures to resolve disputes that should minimize the need for further court intervention.
WCI, along with about 130 of its subsidiaries, filed the previous day for Chapter 11 Bankruptcy protection (see related story). WCI Communities which had traded at the NYSE under the symbol [WCI] has been delisted. Its stock is now quoted on Pink Sheets [OTC: WCIMQ].
"The Company has worked very hard to formulate the special relief it would need so that its transition into Chapter 11 would have no impact on past, present or future customers," said Thomas Lauria of White & Case, WCI’s counsel in the Chapter 11 case.
The Court’s orders also permit WCI to continue supporting the operations of Prudential Florida Realty, and its WCI Mortgage venture, neither of which has sought Chapter 11 relief. In addition, WCI may continue to provide all recreational amenities and club-related services at existing projects, performing ongoing warranty obligations and honoring all customer incentive programs.
The Court also authorized the payment of all employee wages and benefits, including the payment of all compensation and commissions earned by brokers.
"Our workforce is our most valuable and irreplaceable asset," said David L. Fry, interim president and CEO. "For this process to succeed as it should, we need to make sure that our team receives all required payments and ongoing benefits."
As a final matter, the Court approved the Company’s agreement with its senior lenders to obtain immediate access to approximately $50 million of cash on hand.
"This will provide sufficient liquidity to run the business until the Company can finalize a deal for a new debtor-in-possession credit facility, which we expect to ask the Court to approve on August 27," Mr. Lauria told the Court at the hearing.
The company website contains a special page for information related to the reorganization. It contains a toll free information line for vendors, customers and other interested parties: (800) 924-1890. It also provides copies of related press releases and a Q&A section:
General Questions:
What is Chapter 11?
First and foremost, it does NOT mean that the Company is going out of business. Chapter 11 is a legal mechanism for Court-supervised reorganization or restructuring of a Company’s obligations. Chapter 11 provides a way for companies to address their financial challenges in order to become a viable entity, while continuing day-to-day operations.
Why did you file for Chapter 11?
Like other large homebuilders, WCI has been affected by the recent deterioration of the real estate market and general business environment, which in turn has led to a substantial backlog of unsold properties, including many resulting from purchaser cancellations or defaults on existing sales.
Over the past 18 months we have taken a number of steps to bring our operations in line with today’s marketplace realities. Now the Company is working to achieve a restructuring of its balance sheet in order to ensure that its capital structure is also aligned with realties of today’s housing market. Chapter 11 provides the most efficient and timely process for accomplishing this.
Do you have enough money to stay in business?
In the near term, we have asked the Court for permission to use approximately $50 million of our cash collateral in order to meet our immediate obligations to suppliers and other operating costs.
Does the filing mean you are going out of business?
Absolutely not. We filed for Chapter 11 to preserve and strengthen our business. The filing will give us valuable “breathing space” to address our financial situation while keeping our main focus on the Company’s core business and its future opportunities.
What happens during Chapter 11?
The Chapter 11 filing triggers an “automatic stay” which prevents anyone from collecting debts owed by the Company prior to the filing of the Chapter 11 petition, such as payments to creditors and bondholders, unless those creditors are deemed to be secured (such as suppliers who have valid mechanics liens.)
Chapter 11 permits, and even encourages, daily operations to continue as usual. We will continue to serve our homebuyers, employees will continue to be paid, and materials delivered and services performed after the filing date will be paid for in the ordinary course of business.
While business continues, management will work with the Company’s creditors on finalizing a plan to restructure the Company’s obligations. The restructuring plan is called a Plan of Reorganization. When the creditors and the Court accept the plan, it is said to be “confirmed” and at that time WCI Communities emerges from Chapter 11 as a reorganized company
How long will the Company be in Chapter 11?
It is difficult to speculate on how long the Chapter 11 process will take, but management’s goal is to emerge from the financial restructuring process as soon as possible.
Which entities are included in the filing?
Besides WCI Communities Inc., 126 entities are included in the filing. WCI’s real-estate servicing arm, Prudential Florida Realty, WCI Mortgage and certain joint ventures WCI participates in were not included in the filing.
Do companies ever emerge from Chapter 11?
Many companies, including Ryan Homes, Delta Airlines, Continental Airlines, Texaco, Macy’s, U-Haul, and 7-Eleven have successfully reorganized under Chapter 11. We expect the same success.
Where can I find Chapter 11 case information?
WCI has set up a special Restructuring Information page on the Company website, www.wcicommunities.com, which contains a variety of information on our Chapter 11 restructuring. WCI has also set up a toll-free information hotline for inquiries at (800) 924-1890. Additional information can be found at www.epiqbankruptcysolutions.com. These resources are designed to provide information on the restructuring to suppliers, employees, customers, shareholders and any other interested parties.
11 come 7
We all should know that Chaper 11 can go to Chaper 7. What that means is if the company does not resolve assets and debts to the courts liking or if they chose not to continue operating as the company, (or companies included), they can opt for Chaper 7 which desolves and ends the companies. As they stated they wish to continue which is why the filed Chaper 11 but Chaper 7 can be filed at a point were things don’t work out. That won’t be known for months and perhaps years. So stay tured to the courts procedings.