Court Lets Baldwin Co. Operate Another Week : Bankruptcy: Newport Beach home builder can cover payroll. But its owners cannot be paid.

Financially ailing Baldwin Co. will be able to pay its bills for at least one more week after Bankruptcy Court ruled late Thursday that the home builder can pay essential operating expenses with cash that is earmarked to repay a $70-million debt to its former lender.

The decision allows Baldwin Co.’s operating units to meet a $430,000 payroll that was due Thursday and to make utility, rent and other payments necessary to keep the Newport Beach home builder’s doors open, said David Frauman, attorney for the Baldwin Co. creditors committee.

But U.S. Bankruptcy Judge Robin Riblet specifically forbade the company from using any of the cash to make salary payments to company owners Alfred and James Baldwin or to any of the several Baldwin relatives who are on the privately owned developer’s payroll, Frauman said. The Baldwin brothers could not be reached for comment.

The order was seen as an effort by Riblet to mollify General Electric Capital Corp., the Connecticut-based lender that had been Baldwin Co.’s chief source of financing until the increasingly acrimonious relationship was dissolved Monday.

By giving Baldwin Co. just a one-week reprieve, Riblet sent a “hurry-up” signal to a group of Baldwin bondholders who are negotiating to buy out GE Capital’s debt and replace the financial company as Baldwin Co.’s lender. The bondholders own most of the $155 million in junk bonds that Baldwin sold in 1993 and are the builder’s largest single group of creditors.

The builder filed for Chapter 11 bankruptcy reorganization July 18, contending that GE Capital had forced it to seek court protection from creditors by cutting off its credit line and sweeping all the cash out of its bank accounts. GE Capital countered by contending that the Baldwin brothers were paying themselves huge salaries in the face of mounting financial woes.

The lender subsequently made an uneasy peace with the builder and in August began lending to Baldwin Co. again with an increased credit line. But as the builder’s debt continued growing, GE Capital began demanding more security and the deal finally unraveled.

Baldwin Co. claimed that its only source of income now is the home sales revenue that it is supposed to use to repay its debt to GE Capital.

Riblet is scheduled to hear more arguments Tuesday regarding Baldwin Co. financing.