HomeFed Group Petitions Court
A group of HomeFed Corp. bondholders petitioned U.S. Bankruptcy Court here Thursday to force the parent of HomeFed Bank into involuntary bankruptcy.
The investors’ petition filed under Chapter 11 of the Bankruptcy Code seeks to recover some of the $120 million in HomeFed Corp. bonds that are in danger of being rendered worthless by the imminent failure of HomeFed Corp.’s principal operation, HomeFed Bank.
HomeFed Corp. missed a $3.8-million payment of interest in May on the convertible subordinated bonds after being prohibited by the Office of Thrift Supervision from disbursing the funds.
HomeFed Bank, a federally chartered savings and loan, was placed on the OTS’ Accelerated Resolution Program in April, a virtual death warrant for the troubled thrift that forestalls a seizure until the government can find a buyer or buyers.
Regulators said in April that stockholders’ and bondholders’ investments would likely by wiped out in the process.
Thomsen Young, a Los Angeles attorney representing bondholders who filed the petition, said his clients own about $55 million of the $120 million of the bonds in question. Those investors include Stonehill Investment Corp. and Leucadia National Corp. The bondholders are unsecured creditors, he said.
Young said HomeFed Bank subsidiary and HomeFed Corp. parent are jointly responsible for the bond payments, but that the S&L; wasn’t included in the petition because the Bankruptcy Code exempts financial institutions from bankruptcy proceedings.
The bondholders’ decision to file was made after out-of-court discussions with HomeFed executives went nowhere, Young said.
Young said a HomeFed Corp. reorganization would not be the first time a S&L; parent firm went through a bankruptcy.
HomeFed Corp. Chairman Kim Fletcher said Thursday the company had not yet seen the bondholders’ filing and would not comment on how it would respond. HomeFed has 30 days to contest the petition.
“I just don’t believe (the petitioners’) action is in best interests of stockholders, bondholders and any other creditors,” Fletcher said.
HomeFed Corp.’s assets and liabilities outside the S&L; operation total about $34 million and $120 million, respectively, Fletcher said. Virtually all of HomeFed’s non-S&L; assets are in HomeFed Communities, a real estate development arm.
