Amfac mired in debt Real estate firm JMB Realty Corp. has placed Amfac Hawaii LLC into Chapter 11 reorganization bankruptcy in Chicago, and plans to issue new ownership stakes to those who hold Amfac's estimated $325 million in debt.
The former Big 5 giant
files for Chapter 11
bankruptcy protectionBy Tim Ruel
truel@starbulletin.comAmfac's 135 employees will not be affected by the filing, the company said. However, the firm is moving forward with plans to close its power plant in Lihue on Kauai at the end of the year, which will affect about 24 workers. Amfac has already shrunk from 1,000 employees since 1996.
Chicago-based JMB bought Amfac for nearly $1 billion in 1988, when it was Hawaii's largest company, and partially financed the purchase by selling certificates of land appreciation -- notes backed by the 60,000 acres Amfac had in Hawaii. At the time, the former Big 5 company was a massive conglomerate with 8,500 employees, and Hawaii's land values were soaring, thanks partly to heavy Japanese real estate investment.
Land values began to drop in 1991, and Amfac has since liquidated much of its Hawaii assets, piece by piece. As of September the firm owned fewer than 5,000 acres statewide.
Liberty House, also once a part of the former Amfac dynasty, filed its own Chapter 11 bankruptcy petition in 1998 and remained embroiled in the reorganization for nearly three years. The retailer was sold and converted to Macy's last year.
In September 2000, Amfac announced it was closing its Kauai sugar operations, putting 400 employees out of work. The firm later sold 18,000 acres on the Garden Isle to Hawaii native Steve Case, chairman of AOL Time Warner, for $25 million. Amfac has also closed its Oahu and Maui sugar operations, including the former Pioneer Mill.
In a statement, Amfac President Gary Nickele said the bankruptcy was necessary "to address liquidity issues primarily related to unmanageable debt service obligations." Nickele, who took over Amfac from Gary Grottke less than a year ago, could not be reached for comment yesterday.
The certificates of land appreciation, known as colas, are due at the end of 2008, according to Amfac financial statements filed with the Securities and Exchange Commission. Some 15,500 people hold the certificates, for a total of $140 million in debt, said Amfac spokesman Jim Boersema. Most of the certificate holders live on the mainland, primarily in Florida and New York, and have been receiving annual interest payments that vary depending upon the prime rate.
Separately, Amfac has racked up $185 million in debt to its affiliate companies and other financial institutions to pay off the interest on the certificates and to sustain local agricultural operations, Boersema said.
The company and its secured creditors are already negotiating with a trustee who represents the certificate holders, and the company will file a plan of reorganization with the bankruptcy court once the negotiations end, Boersema said. All of the company's debt would be converted to ownership stakes in Amfac. JMB would maintain a stake in the firm, but it is not yet clear how much JMB would own.
Nickele blamed much of Amfac's current financial condition on its agricultural operations, which have lost $120 million since 1989, he said. Amfac's other source of revenue primarily comes from the development and sales of its real estate.
In the quarter that ended in September 2001, Amfac had combined losses of $32 million, an increase from $13.1 million in losses in the same quarter in 2000, according to the firm's most recent filing with the SEC.
Amfac's bankruptcy petition and a list of creditors were not immediately available. Amfac is represented in the bankruptcy by the Jones Day Reavis & Pogue law firm of Chicago. Amfac filed in Chicago because technically that is where its headquarters are, said attorney Brad Erens.
The bankruptcy filing does not affect the Waikele links or the two golf courses on Maui that are all owned by companies related to Amfac, the company said.
The company will continue operating as usual, and expects to emerge from bankruptcy within several months, Nickele said. Amfac also plans to move forward with its Kaanapali 2020 master-planned residential community, to be developed on nearly 5,000 acres the firm owns on Maui.
