Homebuilder WCI Files Chapter 11

On August 4th in a Wilmington, Delaware federal court, WCI Communities and 126 of its subsidiaries, in a much-anticipated move, filed for Chapter 11 reorganization.

This move follows bankruptcy filings by Fort Lauderdale-based Levitt and Sons and Hollywood-based TOUSA .

Already suffering from too much debt, slow sales, walk-away buyers and a diminished cash flow, an August 4th call to be paid in cash by holders of $125 million in short-term notes appears to have been the final insult to WCI.

In early 2007, Carl Icahn, billionaire investor, became interested in the Bonita Springs based WCI. Icahn sure there was substantial value that could be unlocked from the firm’s 12,000 acres of land holdings and potential cash flow from ultra-luxury towers under construction across South Florida, including One Bal Harbour, Mosaic and Oceanside Plaza. Icahn aquired a lerge stake in WCI and is now its chairman.

Lewis Goodkin, a Miami real estate analyst, said an Icahn representative called him to discuss a WCI asset research assignment, but a research proposal and fee deal was never struck.

Icahn’s investment consortium offered to buy WCI for $22 a share, or about $928 million.

The WCI board turned down Icahn’s offer.

WCI claims $2.18 billion in assets, in its filings, but only $61.1 million is cash. The homebuilder lists $1.92 billion in liabilities. WCI’s legal team comprises Thomas E. Lauria and Frank L. Eaton, of White & Case in Miami, and Jeffrey M. Schlerf, of Wilmington, Del.

WCI officials declined to comment.

WCI’s court filings list 60,976 creditors.

Vulture buyers are predicted to pick the bones of their condos at discounts of up to 50% from their former retail prices.

Single-family homes in distress sales could go at discounts of 40 to 50% off their previous retail prices and while land could be down 60 to 70% from comparable sales of a year or two ago.

Before the bankruptcy filing halted trading WCI stock had dropped to 60 cents. The following day, WCI stock began trading on the Pink Sheets under the symbol “WCIMQ.”

Some Details:
The following are listed as owners of 5 percent or more of WCI securities:

• Icahn Capital Management

• Barclays Global Investors UK

• Sandell Asset Management Corp.

• Morgan Stanley & Co.

• United States – Indices (Barclays Global Fund Advisors – US Home • Construction Index Fund)

• Don. E. Ackerman

• Dimensional Fund Advisors

Creditors holding largest unsecured claims:

• The Bank of New York, as trustee, $200 million in principal for senior subordinated bonds

• The Bank of New York Trust Co., as trustee, $200 million in principal for subordinated bonds

• The Bank of New York, as trustee, $125 million in principal for subordinated bonds

• The Bank of New York, as trustee, for $125 million in principal for subordinated bonds

• JP Morgan Chase Bank, as trustee, for $100 million in subordinated bonds

• JP Morgan Chase Bank, as trustee, for $65 million in subordinated bonds

• Key Bank, N.A., $10.2 million

• Regent International Hotels, $3 million

• Regent Bal Harbour Management, $533,000

• Starwood Hotels and Resorts Worldwide, $400,000

Contributed by MLR Realty