Bloomberg News

KB Home, Partners Settle Fight Over Las Vegas Project

October 06, 2011

(Updates with details from filing in fifth paragraph.)

Oct. 6 (Bloomberg) -- Builders KB Home, Beazer Homes USA Inc. and Toll Brothers Inc. settled a court fight with their partner in a Las Vegas-area development that may make it easier for the $1.2 billion project to exit bankruptcy.

Under the proposal, units of the builders, along with Pardee Homes of Nevada, will pay $35.5 million to Focus South Group LLC and its affiliates, according to filings yesterday in U.S. Bankruptcy Court in Las Vegas. The home builders and Focus were partners in the 1,940-acre commercial and residential Inspirada development, which was forced into bankruptcy court in Las Vegas last year after the recession and feuding among the partners halted building.

Focus agreed to drop its legal claims in the bankruptcy case and support a reorganization plan under which KB Home, Beazer, Toll Brothers and Pardee would retain ownership of the project, according to court papers.

“If the settlement is approved by the court and the plan is confirmed, the disputes and litigation among every major constituency in this case, with one exception, will have been resolved,” the trustee overseeing the bankrupt development said in court papers.

Focus Group will also be paid $5 million by the holding company for Inspirada, South Edge LLC, and be entitled to $5 million from a development-related bank account, the trustee, Cynthia Nelson, said in court papers.

Mismanaging the Project

JPMorgan Chase Bank NA forced South Edge into bankruptcy in December, accusing the builders of mismanaging the project and of trying to escape liability for a $585 million loan. The builders and JPMorgan, acting as agent for the lenders on the project, settled their fight earlier this year. Under that proposal, lenders will be paid $330 million to $340 million of the $367 million they are owed, according to court records.

Focus had opposed that settlement, which is the centerpiece of the reorganization plan for development. Under the latest settlement, Focus will drop its opposition.

The Focus deal will leave only one opponent to Inspirada’s exit from bankruptcy, Meritage Homes of Nevada, one of the eight original partners in the development.

U.S. Bankruptcy Judge Bruce A. Markell is scheduled to consider approving the reorganization plan at a hearing later this month.

KB Home, Beazer and Toll Brothers all rose today in New York Stock Exchange composite trading. KB Home rose almost 4 percent to $6.32, Beazer climbed almost 8 percent to $1.52 and Toll Brothers was up about 1.5 percent at $15.27.

The case is in re South Edge LLC, 10-32968, U.S. Bankruptcy Court, District of Nevada (Las Vegas).

--Editors: Andrew Dunn, Peter Blumberg

To contact the reporter on this story: {Steven Church} in Wilmington, Delaware, at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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