From the Asbury Park Press:
Bankrupt builder Kara Homes Inc. wants to borrow $5 million from a hedge fund, money that the company would use to stay afloat and finish the construction of some homes that are close to completion.
The loan from Plainfield Special Situations Master Fund Ltd., a hedge fund based in Greenwich, Conn., will be the subject of a hearing before U.S. Bankruptcy Court Judge Michael B. Kaplan on Tuesday.
East Brunswick-based Kara filed for Chapter 11 bankruptcy Oct. 5, saying the real estate market downturn prevented it from paying its debts. The company reported $350 million in assets and $227 million in liabilities.
If approved, the loan will be the second that Kara Homes has received since it filed for bankruptcy. In early December, Kaplan approved a $2.6 million loan from investment bank Bear Stearns. Of that amount, approximately $1.7 million has been spent, the company said in court documents.
The proposed $5 million line-of-credit loan will repay Bear Stearns in full and give the company an additional $2.4 million.
“It will take out Bear Stearns, and it will provide the debtor with some additional life,” Kara Homes lawyer David L. Bruck said.
The money would pay costs, such as rent, utility bills, wages, insurance as well as costs to finish construction of some homes. It would provide enough working capital to fund the company for 13 weeks.
Some houses are “near completion, and, if we had a little bit of money, we can finish them and basically generate a sale,” Bruck said. “It could basically bring another 30 homes to market.”
…
Earlier this week, Kaplan said Kara can sell four of its projects at an auction to pay off nearly $9 million it owes Magyar Bank. They are: Dayna Estates in Toms River, Hartley Estates in Little Egg Harbor, Sterling Acres in Monroe and Prospect Ridge Estates in Stafford.
What a scam. It’s like Mills. This company is
finished. The Hedge Fund loves the expenses
involved.
You talk about Hard Money. Get the fine print
on this one.
Kara Homes is like the HB version of Casey Serin. Pay debt by taking on more debt.
Smart.
was that loan uses OPTION A.R.M or 120% Financing or MUMBO-JUMBO loan or INTEREST-ONLY LOAN ?????
Love that craze of the Real Estate 2000`s !!!
I posted my analysis of this funding on the Shores Blog. Frankly as this case goes on and on it is quickly achieving the status of a case that continues to eat up what unencumbered assets the bankruptcy estate had as of the time of filing to a point where nothing will be left. The obvious reason for this is it provides a vehicle for company executives to continue to earn high salaries while a large group of bankruptcy professionals churn the case for additional fees. The entire $5,000,000 is expected to be spent by March 30th, approximately 6 months after the petition was filed (in early October). My guess is the salaries and professional fees will total approximately $5,000,000 by that date.