7677 East Berry defaults on DIP loan; agrees to sell project to lenders

By Caroline Salls

Pittsburgh, June 1 - 7677 East Berry Avenue Associates, LP requested court approval to enter into a forbearance agreement in connection with a default on its debtor-in-possession facility, according to a Friday filing with the U.S. Bankruptcy Court for the District of Colorado.

The company said it has been unable to meet its first six-month benchmark that required it to have $10 million in net proceeds from the sale of condominium units by May 20. As a result, the company defaulted on the DIP loan agreement.

However, lender agent Hypo Real Estate Capital Corp. has agreed not to act on the default, subject to several conditions.

Specifically, a chief restructuring officer will be appointed for 7677's bankruptcy case, and the company must file a plan of reorganization under which Hypo and the pre-bankruptcy lenders will become the owner of the condominium project through a conversion of debt to equity.

Under the reorganization plan:

a. Hypo and the pre-bankruptcy lenders will become owners of the project by converting some or all of their outstanding debt into equity in the reorganized company;

• Outstanding DIP loan debt will roll into an exit facility to be provided by Hypo and other lenders;

• Mechanic's lien claims and other secured claims would be addressed in accordance with the DIP order;

• Treatment of unsecured claims would be addressed through negotiation with the official committee of unsecured creditors;

• Construction warranty claims of current condominium unit owners would be unimpaired, subject to review and approval of the CRO; and

• Existing equity interests would be canceled.

7677 East Berry must file the plan by June 21, the disclosure statement must be approved by the court by July 21, the plan must be confirmed by Aug. 30, and the plan must take effect by Sept. 15.

7677 East Berry, Everest Holdings, LLC and EDC Denver I, LLC are the owners of the Landmark Residential Condominium tower in Denver. The companies filed for bankruptcy on Aug. 28, 2009. The Chapter 11 case number is 09-28000.

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