Where are Ginn Company’s Debt Negotiations Headed?
It’s taking too long to be a simple restructuring of a credit vehicle.
Palm Coast, Florida – August 20, 2008 – (Updated August 26) It’s been seven weeks since two Ginn Company affiliated entities, Ginn-LA CS Borrower, LLC and Ginn-LA Conduit Lender, Inc., defaulted on a $675 million credit facility with Credit Suisse. (Note: the LA stands for Lubert-Adler, Ginn’s Philadelphia-based financial partner.) The company issued a statement at that time (see story) with a follow up statement on August 1st(see story). No negotiations progress has been acknowledged. Each request for further information is promptly and politely answered with "still negotiating."Projects affected by the credit facility are:
-
Ginn sur Mer in the Bahamas
-
Laurelmor near Boone, North Carolina
-
Quail West near Naples, Florida
-
Tesoro in Port St. Lucie, Florida
Ginn properties in the Palm Coast, FL area are not affected.
It’s fair to assume that the failure to make principal and interest payment on June 30th was not a surprise to either Ginn or the Credit Suisse consortium. They likely had several conversations leading up to that date. Add to those discussions the 30-day forbearance period and the 20 days since its expiration. The extended negotiation duration leads me to believe that they are not negotiating a simple restructure of the credit facility.
I’ve heard a couple of rumors:
-
Ginn is negotiation a sale of assets to Jorge Perez of the Related Group
-
Ginn will be bought by a consortium of wealthy Arab investors
Both make interesting party conversation but are most likely rumors, but in the absence of hard information coming from the Ginn Company, such speculation is to be expected. Extended negotiations are more likely centering on the disposition of assets and/or realignment of equity, with Credit Suisse possibly coming into one or more Ginn/Lubert-Adler projects as a partner.
I’ve heard one scenario (unconfirmed, thus still a rumor) from a couple of sources close to the Ginn organization that makes sense. It has the discussions headed in this direction:
-
Ginn relinquishes Tesoro and Quail West to Credit Suisse.
-
Credit Suisse will be become a partner (take an equity interest) in both Ginn sur Mer and Laurelmor.
The first iteration of this scenario had Laurelmor going to Credit Suisse, but a $110 million commitment for infrastructure complicated that alternative. Likewise, it would be difficult to separate Ginn sur Mer’s encumbered assets from those not under the credit facility. An equity solution makes more sense there.
It’s speculative, but the plausibility of this outcome is reinforced by Ginn president Robert Gidel’s August 1st statement.
"We want you to know that throughout the negotiation with the lending consortium, our primary focus has been on ensuring that our members and property owners are taken care of during, and after, this period. However, the lack of an agreement between the Borrowers and the lenders means that the Borrowers will have to make difficult decisions relating to its management and oversight of these four properties."
"The Borrower may have to discontinue the payment of certain dues and POA assessments on the lots that they own, which will put stress on the operations of the Clubs at Tesoro and Quail West."
"Regardless, as the current managers of the projects, we will do everything possible to provide for the orderly transition of these assets for the benefit of the Members, lot owners, and lenders."
August 26 Update:
While Ginn remains silent on any progres in the negotiations with Credit Suisse, an alternative possible outcome was recently posed to me, again by a credible source. He speculates that since the Credit Suisse debt is "non-recourse," Ginn may simply negotiate a buyout of the loan at a substantial discount, thus erasing a big hunk of debt from his balance sheet. Because the present value of the property is substantially less than the debt, the lender consortium is unlikely to want the property unless they have a third party buyer in hand.
Stay tuned for updates on news from the GINNdom.
Slickster
Having dealt with a southern developer and his silken words of wonder, his imagineering world of make believe for a development, (NOT Ginn), it is no suprise that Ginn would be the last one on earth to tell anyone, including you, his ship was sinking. He no doubt has a very comfortable raft and damn the passengers on the good ship Ginn.
smart deal
I understand the bond deal was non-recourse so it looks to me like Ginn made a smart "sale" of a bunch of lots right before the market tanked. Negotiations are probably about whether the bond holders want to take title now or wait. Ed
Goastly Blimp
Was that Bobbies blimp that was cris-crossing Flagler county skies a few days ago? It was painted all white with no advertizements on it and looked like Casper. Has anyone see his jet lately?