A federal court in San Diego on Monday approved a partial reorganization plan for Maruko Inc., a real estate company that went bankrupt two years ago in the face of $3.8 billion in claims from creditors.
Maruko was an aggressive speculator in North American real estate during the late 1980s. It bought a string of hotels, condominiums and other properties before it filed for reorganization in a Tokyo bankruptcy court in August, 1991.
Two months later, Maruko filed for protection from its creditors in U.S. District Court in San Diego. It was the first case of concurrent bankruptcy filings in U.S. and Japanese courts, according to Arnold Quittner, a Los Angeles-based lawyer representing the company.
The plan approved by U.S. Bankruptcy Judge Louise DeCarl Adler concerned claims from U.S. creditors, Japanese investors in Maruko’s North American projects and holders of Swiss bonds issued by the company. Maruko has secured claims totaling about $57 million and unsecured claims of about $257 million in the United States, said Richard Wynne, an attorney for the worldwide creditors committee.
Additional creditors’ claims in Japan--where Maruko owns some 1,600 properties--amount to $3.5 billion, Wynne said.
In the settlement, Maruko agreed to pay 6 cents on the dollar to creditors involved in the San Diego case. Its primary financial backer, Mitsubishi Trust & Banking Corp., also offered to share some of its claims with North American creditors in a “good-faith gesture” that would provide up to 65 cents on the dollar to smaller claimants.
A final restructuring plan in the Tokyo bankruptcy court is expected sometime next year, Wynne said.
Maruko was the quintessential Japanese “bubble company,” industry analysts say. It purchased properties such as the Hollywood Roosevelt Hotel at peak prices. The bottom dropped out of the California real estate market at the same time land prices and financial markets crashed in Japan.
The company’s major assets in Southern California are being liquidated at prices amounting to no more than half what it cost to acquire or build them, according to Wynne.
Maruko purchased the Roosevelt for $28.3 million in 1990 and is negotiating to liquidate it for about $11.5 million. It bought the Hyatt Grand Champions Resorts in Indian Wells for $66 million in 1990 and expects to sell it for about $35 million.