Builders Scoop Up Baldwin Co. Junk Bonds at Steep Discounts

Home builders lusting after the land holdings of troubled Baldwin Co. are attempting to pick up the Southern California acreage on the cheap by acquiring the builder’s junk bonds for pennies on the dollar, traders say.

At least $50 million of the Newport Beach builder’s $155 million in bonds has been sold in the last month, all for 45 cents on the dollar. The sale further depressed the value of the bonds, now trading at about 37% of face value. Baldwin is in bankruptcy proceedings.

“Some builders hope to own the Baldwin land assets through the bonds,” said one trader, who asked to remain unidentified. The bonds could be swapped for real estate as part of a bankruptcy recovery plan.

“The question is whether you can buy up enough bonds,” the trader said.

So far, industry insiders say, only one of Baldwin’s major bondholders--Wall Street investment firm Morgens, Waterfall, Vindiatis & Co.--has dumped its holdings.

Testimony during Baldwin’s monthly bankruptcy court appearance in Santa Barbara this week also revealed that Morgens has sold its $12.5-million share of an $85-million loan that bondholders made to Baldwin two months ago. Some bond analysts see that as a signal that the investment firm has little faith in the builder’s ability to recover and make good on its debt. Morgens would not comment.

Times staff writer Debora Vrana contributed to this report.