Koll Group Files for Bankruptcy

Bolsa Chica developer Koll Real Estate Group Inc. on Monday filed its previously announced bankruptcy reorganization petition in Delaware.

The financial plan, already approved by 95% of the company’s bondholders and shareholders, calls for $210 million of bond debt to be swapped for new stock. The plan will give the bondholders a 90% stake in the company and repays them at an average rate of about 50 cents to the dollar.

KREG listed a total of $339 million in unsecured debt in its filing, but about a third of that is not affected by the bankruptcy, Koll attorney Greg Preston said.

Koll Real Estate Group is a commercial and residential developer. Its largest single asset is a planned development adjacent to the environmentally sensitive Bolsa Chica wetlands near Huntington Beach.

The development, which has been tied up by environmental challenges for nearly 20 years, is approved for 2,400 homes--down from 5,700 homes in the original plan.

The delays caused many of KREG’s financial troubles by adding more than $24 million a year in interest charges on its bonds to the company’s debt load.

KREG Chairman Donald M. Koll has said he expects the plan to be approved by the court and the bankruptcy period to end in about 45 days.

In May, KREG reported a first-quarter loss of $4.9 million, or 10 cents a share, compared with a loss of $7.9 million, or 17 cents, a year earlier.

The company’s stock was removed from Nasdaq market system trading Monday and will be listed on less-active Nasdaq over-the-counter markets until the bankruptcy is terminated, Preston said.

The bankruptcy--which was demanded by KREG’s bondholders--lets the Newport Beach-based residential and commercial development company pay off its bond debts at a discount while preserving $200 million in tax benefits that can be used to offset future income taxes.

KREG’s major unsecured creditors are the individuals and investment funds that own the company’s bonds.