Debt-for-Equity Swap Deadline Extended

Koll Real Estate Group Inc. has extended the deadline for its debt-for-equity stock swap for the third time in an effort to head off a bankruptcy filing.

The company pushed back the deadline to the close of business today, in an effort to persuade more of its bondholders to trade their debt securities for common stock.

The exchange would allow the company to remove about $200 million in long-term debt, but would give a 90% stake in the company to bondholders.

“There are some bondholders that might change their mind, and we want to give them a chance,” said KREG Chairman Donald Koll.

Koll was uncertain whether the company would be able to get a required 90% of the $200 million in debt securities exchanged. If it doesn’t, the company plans to file a bankruptcy petition to reorganize its debts, according to documents it filed with the Securities and Exchange Commission.

So far, bondholders have tendered 76% of the debt.

In preparing a Chapter 11 petition, the company has drafted a reorganization plan that a majority of security holders already have approved.

“Either way, it’s fabulous for the company,” Koll said.

However, some of the bondholders are reportedly holding out for a bankruptcy to reap the tax advantages. Filing a bankruptcy with a pre-approved reorganization plan would allow the company to write down up to $200 million of its net losses. It also would give debt holders control of the company.

Koll Real Estate’s stock listing was scheduled to be removed from the Nasdaq national market system this week if it couldn’t get bondholders to agree to the restructuring.

However, the company negotiated a brief extension and continued to trade Wednesday, according to Nasdaq officials. The stock remained unchanged at 9 cents a share at the close of trading Wednesday.

Meantime, executives have said that a court ruling last week will delay development of its major asset, land overlooking the Bolsa Chica wetlands, for at least six months. A judge sent the company’s development plan back to the California Coastal Commission for review.

Opposition from environmentalists stalled the Bolsa Chica project for years, and a staggering debt load is halting the developer from completing the 2,400-home project. Analysts say a restructuring is the only way the company can borrow the money needed to develop it.

KREG is a residential and commercial developer not related to the three other companies that bear the Koll name: Koll Construction, Koll Resorts International and Koll, a property manager.