The Distressed Debt Alert

Sunwest Assets to be Sold at Bankruptcy Auction

The assets of senior housing operator Sunwest Management of Salem, Ore., will be sold at a bankruptcy auction on or about May 17, the Portland Business Journal reported.

A joint venture of Blackstone Real Estate Advisors VI and Emeritus Senior Living will serve as the stalking horse bidder with a bid of $1.3 billion for 134 Sunwest properties. The sale is expected to close in July.

Source: News Story

Crescent Heights, a Miami, Fla.-based developer, purchased The Palatine apartment complex in Arlington, Va., from owners Monument Realty and its lenders iStar Financial and Allied Irish Bank for $118 million in a foreclosure auction, the Washington Business Journal reported.

Monument Realty built the 262-unit complex, which opened in 2008, with a $94 million loan from Fremont Investment & Loan. Fremont later sold the loan to iStar. The complex was originally marketed for sale as condominiums, but converted to rental apartments after the condo market collapsed.

Source: News Story

Nearly half of the U.S. non-financial companies that defaulted on debt last year were backed by private equity firms, Moody's Investors Service said. That could benefit creditors.

Many of these defaults were likely to be distressed exchanges and prepackaged bankruptcies. In the past, these circumstances provided better recoveries for creditors than Chapter 11 filings or missed interest payments, Moody's said in a report.

Source: Press Release

San Diego area toll road operator South Bay Expressway, a subsidiary of Macquarie Infrastructure Group of Australia, filed for Chapter 11 bankruptcy, the San Diego Union-Tribune reported.

The company said that it owes $510 million to lenders, including $170 million to the U.S. government. Revenues generated from the 10-mile privately operated toll road, which opened in 2007 in southern San Diego County, have suffered from the protracted economic downturn. Approximately 22,600 cars use the toll road each day, far below the initial projections of 60,000, according to the Union-Tribune.

Source: News Story

Starwood Capital Group, which purchased Riviera Holdings' first mortgage at a big discount, looks to take control of the casino company through its leadership of a creditors committee that's negotiating a prepackaged bankruptcy, Bloomberg reported.

Starwood and other investors purchased Riviera's first mortgage at 50 cents on the dollar after Riviera defaulted on the $245 million loan. The casino owner's holdings include the Riviera Hotel and Casino in Las Vegas and a Colorado casino.

Source: News Story

Bosque Power Co., a Laguna Park, Texas, electricity generator, filed for Chapter 11 bankruptcy along with five affiliates, Reuters reported.

Source: News Story

Tennenbaum Capital, a Santa Monica, Calif.-based distressed investment firm, looks to raise $1 billion for a new distressed debt fund and expects to complete the initial fundraising in two to three months, Bloomberg reported.

Source: News Story

Some commercial real estate asset classes, such as the hospitality and multifamily-housing sectors, are expected to bottom out and begin to recover this year, accounting and consulting firm Deloitte said in a research report.

Hospitality and multifamily may be the first to recover because of the short-term nature of their leases, Deloitte said.

Even as a recovery is likely to begin later this year, commercial real estate may still be plagued by declining values, debt maturity, tight credit access and stalled construction prior to the market bottoming out, the report said.

Investment in distressed assets may prove to be opportune this year, Deloitte said. Opportunistic investors have capital available to invest, but are waiting for the market to bottom out before spending. The U.S. can expect to see an influx of foreign capital from Asia, Germany and the Middle East when the investing flood gates open, Deloitte said.

The report said that markets to watch this year for growth include the hospitality sector in San Francisco and Atlanta and the office markets in Washington, D.C., and New York.

Source: Report

Babson Capital Management, an investment firm affiliated with MassMutual Financial Group, said it expanded its Asia Pacific presence as it established an eight-member team to source mezzanine debt and private equity investments in the region.

Michael P. Hermsen, a managing director of Babson Capital who co-heads the firm's mezzanine and private equity group will oversee the Asia Pacific team. Working out of the firm's Sydney, Australia, office will be managing directors Shane A. Foster and Adam Wheeler, director Elliott Wong and associate director Adrian Ng.

Working with the Sydney-based team out of Los Angeles will be managing director Benjamin W. Silver, as well as Hermsen. Consultant Adam Nowak and director Howe Wu will be based in Asia.

Source: Press Release

The Utah Attorney Generals' office charged Dwight Shane Baldwin, chief executive of distressed debt investor Silverleaf Financial, with two counts of felony securities fraud and two counts of felony theft in connection with an alleged fraudulent investment scheme involving Baldwin's Salt Lake City-based Silverleaf Cos. and a California toy company, GarageCo.

A warrant was issued for Baldwin's arrest and bail was set at $25,000, Assistant Attorney General Charlene Barlow said.

Charges were filed against Baldwin following complaints by two Utah residents who claim that Baldwin solicited $200,000 from them to invest in GarageCo., but used large portions of the funds for other purposes and wouldn't refund their money, according to an affidavit filed in a state court in Utah.

Source: Affidavit

The delinquency rate on commercial real estate loan collateralized debt obligations will continue to climb this year, possibly reaching 25% by year-end, Fitch Ratings forecast.

However, Fitch's index that tracks delinquencies on commercial real estate loan CDOs decreased slightly in February due to asset managers extending loans and disposing of troubled assets. The delinquency rate, as tracked by the index, dropped by 50 basis points from the previous month to 12.5%.

Resolved loans lowered the delinquency rate even as losses rose, Fitch said. Extended and restructured loans also lowered the delinquency rate, yet the credit characteristics of many restructured loans remain questionable.

Source: Report