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Maui Land reports dire finances


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POSTED: Thursday, November 05, 2009

Maui Land & Pineapple Co., which said Tuesday it would cease pineapple operations by the end of the year and lay off up to 285 employees, is in danger of going out of business without taking aggressive steps to raise cash and stem losses, according to the company's quarterly filing yesterday with the U.S. Securities and Exchange Commission.

The Kahului-based company, which lost $92.9 million through the first nine months of this year, said in the filing that its cash outlook for the next 12 months and ability to continue to meet its financial obligations is “;highly dependent on selling certain real estate assets in a difficult market.”;

MLP said as of Sept. 30, it owed $92.8 million through borrowing agreements and had available cash of just $855,000, with an additional $15.6 million available under existing lines of credit. Overall, the company said its total liabilities exceeded its total assets by $60.1 million.

With loan default deadlines looming, MLP said that in October it amended its agreements on its two lines of credit. Its $45 million revolving line of credit was increased to $50 million and the maturity of the credit was extended to March 2011 from March 2010, while the minimum liquidity that MLP was required to maintain was reduced to $8 million from $10 million. In addition, the maturity and liquidity requirement for MLP's $25 million revolving line of credit was similarly amended.

MLP also is paying 5.875 percent interest annually on $40 million in senior secured convertible notes issued in July 2008 that is convertible into the company's common stock. Defaulting on its lines of credit could have required the company to redeem the convertible notes at 115 percent of the outstanding amount of principal and accrued interest. The company said if that debt becomes immediately due, it would not have sufficient liquidity to pay what it owes.

In addition, MLP said it has an obligation to purchase the spa, beach club improvements and the sundry store from Kapalua Bay Holdings LLC—in which MLP has a 51 percent equity interest—at actual construction costs of about $35 million. MLP said it is negotiating with the other members of Bay Holdings to restructure the purchase and sale of the assets and avoid immediate cash requirements because MLP does not currently have enough cash to complete the sale.

“;These circumstances raise substantial doubt about the company's ability to continue as a going concern,”; MLP said.

In response to its predicament, MLP said it is undertaking several financial and strategic initiatives to reduce cash commitments and generate cash flow from a variety of sources, including the sale of several real estate assets and seeking out third parties to operate certain parts of MLP's operations in order to reduce overhead and cash requirements.