Baldwin Co. Wins Time to Seek More Funds
Baldwin Co. owners James and Alfred Baldwin deflected for at least three more days Monday the appointment of a bankruptcy trustee to oversee the dismantling of their financially crippled home-building business.
They also won Bankruptcy Court approval to use cash from the sale of homes in a few of their developments to pay employee wages and benefits and other essential operating costs at the Newport Beach firm.
Court testimony showed that without the cash--which is supposed to help pay off an $85-million operating loan--the company is virtually penniless.
The company is trying to secure an $8-million addition to its loan, but court documents show that the prospective lender won’t sign a deal unless the Baldwins surrender control.
The brothers asked the court to put off Monday’s scheduled trustee appointment to allow them to resume negotiations for a private settlement that could win them some concessions they wouldn’t get from a trustee.
The brothers also agreed that they will give up operational control of the company in favor of an independent manager when the case is taken up again Thursday afternoon in federal Bankruptcy Court in Santa Barbara.
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The new moves bring hope of relief to hundreds of Baldwin Co. creditors and to scores of Baldwin homeowners who have been living in the company’s half-completed developments, paying for such amenities as community swimming pools that have not yet been installed.
Creditors’ attorney David Frauman said that replacing the Baldwin brothers is key to finding outside buyers or investors to complete the company’s developments on more than 5,000 acres in Orange, Los Angeles, San Diego and Ventura counties.
At stake now is whether a new manager will be hired by Baldwin Co. at the behest of lender Merrill Lynch Global Allocation Fund Inc. or be appointed by U.S. Bankruptcy Judge Robin Riblet, who has overseen the nearly 10-month-old Chapter 11 bankruptcy case.
A court-appointed trustee would be required to operate the company for the benefit of its creditors, putting the Baldwin brothers last on the list of those whose interests must be considered.
But a deal between the brothers and Merrill Lynch Global, an arm of brokerage Merrill Lynch & Co., could win the Baldwins some benefits of their own as a condition of surrendering control.
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In negotiations that ended abruptly two weeks ago, they were seeking Merrill Lynch’s agreement to free them of responsibility for at least $10 million in personal guarantees they made on behalf of the building company.
The brothers also had asked the lender to use part of any new loan to the bankrupt home building business as an advance to pay $666,000 in property taxes owed in Los Angeles County by one of their companies not in bankruptcy.
Whether that deal is approved or the court acts on the demand by Baldwin Co. creditors for a trustee, the Baldwins made it clear Monday that they will give up control of the business their father began 39 years ago.
Sources say the new manager of Baldwin Co. is likely to be Southern California building industry executive James Johnson, president of Newport Beach-based Lusk Co.
A turnaround specialist, Johnson was hired by Lusk in 1992 to reverse the private company’s losses, a chore that insiders say he has handled successfully.
A Baldwin Co. spokeswoman said Monday that the brothers have filed papers in Bankruptcy Court denying allegations of self-dealing leveled against them in the creditors’ motion for appointment of a trustee.
