Koll, Bondholders at Odds Over Bankruptcy Issue

Executives at Koll Real Estate Group Inc. say they may be forced to put the company in bankruptcy proceedings if they can’t persuade enough bondholders to trade in $200 million in debt securities for common stock by today.

Executives have resisted filing for bankruptcy protection, fearing it would taint the Newport Beach development company’s name and its ability to raise money. But some bondholders believe a voluntary reorganization under Chapter 11 of the federal bankruptcy laws would provide tax advantages.

KREG has made little headway so far in its efforts to persuade holders of a required 90% of debt securities to tender their shares, even though the company has twice pushed back the deadline, executives said. Holders had tendered 74% of the total debt by Monday.

“We’ve extended [the deadline], but we aren’t significantly closer,” said Raymond J. Pacini, KREG’s chief financial officer.

In a document filed in May with the Securities and Exchange Commission, the company said it planned to file for Chapter 11 bankruptcy if it could not convert enough debt to equity. However, executives said Monday that they could still decide to extend the deadline for the exchange offer.

Both the bankruptcy reorganization and exchange are similar, swapping company stock for debt and putting outside directors on Koll’s board.

However, the bankruptcy plan has big tax advantages that many bondholders prefer, including the option to write down up to $200 million of its net operating losses, according to Wilbur Ross of Rothschild Inc. in New York, which represents the bondholders group.