A Florida bankruptcy judge on Thursday confirmed the Chapter 11 liquidation plan for Tousa Inc. despite objections from the U.S. trustee, ending the beleaguered homebuilder's protracted, five-year stay in bankruptcy.
U.S. Bankruptcy Judge John K. Olson confirmed the plan over concerns by the U.S. Trustee's Office regarding third-party releases, the process for fee request applications and the fate of undistributed funds.
“People negotiated this plan painfully,” Judge Olson said. “This is an integrated document.”
Steven Schneiderman, who represents the U.S. Trustee, told the court that he wasn't there to “derail the freight train,” but voiced concerns about undeliverable funds being reverted to the general pot after six months. He said a number of small unsecured creditors, who may have claims of lost deposits for homes that weren't built, might not be easily reached and suggested that the undeliverable money be left with the clerk of court instead of going back to the estate.
“It's a homebuilding case. People were buying homes,” Schneiderman said. “There are unsecured creditors who aren't here. Those people should not be left out.”
But the debtors' attorneys pointed out that six months is longer than the 120 days required by local rules and said that numerous homeowners who have moved have had no difficulty in keeping the court updated with their new addresses. They said that forcing the debtors to track down each and every creditor would eat up more resources than the claims were worth, and the judge agreed.
“I have confidence that they will make an honest effort to distribute the money,” Judge Olson said. “But I don't want to put the liquidating trustee in a position of chasing his tail.”
Tousa attorney Joshua Sussberg of Kirkland & Ellis LLP — who noted that he has become a father three times over since he began representing the homebuilder — said the creditors had voted overwhelmingly in favor of the plan, which is the result of three years of mediation and is a compilation of at least 15 settlements.
“Today is the day that we do in fact spike the football into the end zone,” Sussberg said.
Tousa, which filed for Chapter 11 protection in January 2008, threw in the towel on trying to reorganize its business and opted for liquidation instead in May when it filed its proposed plan and disclosure statement along with the creditors committee. While the company tried to rebuild itself, the continually sluggish housing market, especially in Florida, made that impossible.
The company also spent years of litigation over a 2005 pre-petition joint venture with Transeastern Properties Inc. that went sour, although the two sides eventually settled. That settlement became part of an adversary proceeding that reached the Eleventh Circuit in 2012.
With the litigation ongoing for four years, the company decided to start winding down its operations in 2009 and transitioned from built-to-order new sales and construction starts to closing sales of homes that were already under construction, and selling its remaining inventory and many land assets, according to court documents.
In the proposed liquidation plan, first-lien revolver claims of $16.6 million would see a 50 percent recovery from Tousa, and first-lien loan claims of $206.2 million would see a 56 percent recovery. Second-lien term loan claims of $320.4 million would see a 4 percent recovery, and second-lien note claims of $573.5 million would see a 58 percent recovery, according to the proposed plan.
General unsecured claims, which total $106.7 million, would see at least a 5 percent recovery, the proposed plan states.
Tousa is represented by Paul S. Singerman of Berger Singerman LLP and Richard M. Cieri and Joshua A. Sussberg of Kirkland & Ellis LLP.
The official committee of unsecured creditors is represented by Patricia A. Redmond of Stearns Weaver Miller Weissler Alhadeff & Sitterson PA, Daniel H. Golden and Philip C. Dublin of Akin Gump Strauss Hauer & Feld LLP and Lawrence S. Robbins and Michael Waldman of Robbins Russell Englert Orseck Untereiner & Sauber LLP.
The case is In re: Tousa Inc. et al., case number 0:08-bk-10928, in the U.S. Bankruptcy Court for the Southern District of Florida.
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