Beleaguered Orange County home builder Baldwin Co. will be able to meet its payroll this morning but still has no guaranteed financing past Thursday, when a special Bankruptcy Court hearing on the financial issue is planned.
Baldwin Co.'s lender and its creditors committee failed again Monday to settle longstanding differences over terms of a proposed credit line that would enable the company, one of Southern California's largest residential builders, to continue operating.
Baldwin has nearly exhausted a $70-million credit line that has been extended to it on a monthly basis by General Electric Capital Corp. since the builder filed for Chapter 11 bankruptcy reorganization July 18.
The credit line expired Thursday and since then Baldwin had been unable to draw any of the $5 million remaining. An attorney for the company said Friday that without a new agreement, Baldwin would be unable to meet its payroll of about $500,000 today.
Monday's reprieve will give the company "more than enough" money to pay its employees and other operating costs for the rest of the week, said Alfred Baldwin. He and his brother, James, are co-owners of the company.
The four-day reprieve came Monday morning after Baldwin's attorney announced a temporary settlement of the dispute between General Electric and the creditors committee, only to have lawyers for the two launch into a new round of disagreement.
That prompted U.S. Bankruptcy Judge Robin Riblet, conducting an unusual telephonic court session from New Orleans, where she is attending a judicial conference, to order an extension of the expired borrowing pact until a special hearing in her courtroom in Santa Barbara at 3 p.m. Thursday.
The stalemate over the credit issue stems from General Electric Capital's demand for unprecedented foreclosure rights. The lender wants a clause in the agreement that prevents either the court or other creditors from obtaining an injunction to stop any foreclosure it might initiate. Both the judge and the court-appointed creditors committee have objected.
Riblet has said that the clause would "turn over the reins of this case" to General Electric. "I cannot do that," she said on Thursday as she admonished the lender to reconsider its position.
Baldwin in recent months has increased its building activity as sales have increased, said Alfred Baldwin, the company's chairman. As a result, he said, Baldwin has borrowed almost all that it can under the $70-million credit line.
To keep financing its operations while it waits for revenue from home sales, the company has negotiated a new borrowing agreement with General Electric that would give it a total of $85 million.
But it can only get the money if all sides agree on the terms of the loan. And that hasn't happened despite more than half a dozen negotiating sessions since the first post-bankruptcy loan agreement was drafted in late July.