Investors who purchased notes that helped finance the nearly $1 billion buyout of Hawaii's Amfac in 1988 may have to choose between receiving 7 percent of their claim in cash, or getting stock in the new company that would emerge from Amfac's current bankruptcy reorganization. Noteholders of bankrupt
Amfac weigh options
Star-Bulletin staff
Amfac owes the noteholders $139.4 million in principal. If more than 65 percent of the 15,500 noteholders opt for the cash, then those investors would receive a "pro rata" share of $5.2 million in cash, plus stock for the balance of their individual claims. The deal was negotiated in the months before Amfac filed for Chapter 11 bankruptcy on Feb. 27 and Amfac has agreed to incorporate the plan into its pending reorganization, according to a filing this week with the Securities & Exchange Commission.
Noteholders who opt for stock would essentially wind up with minority ownership of a firm that plans to develop about 5,000 acres on Maui.
Bank One Trust Co. of Ohio represents the noteholders. In the filing, Bank One said it has been advised that the noteholders would fare worse if Amfac were to be liquidated, or if another plan were adopted, because Amfac also owes $185 million in senior debt to its parent company, Northbrook Corp.
Northbrook is an affiliate of Chicago-based JMB Realty Corp., which bought Amfac in the Hawaii's heyday of the late 1980s. In 1989, Amfac sold $385 million of the notes, known as certificates of land appreciation. Amfac has since bought back some of the notes, and most of them are now owned by non-Hawaii residents. Northbrook has also sold off much of Amfac's assets, including thousands of acres of land in Hawaii. The notes have paid annual interest and were due in 2008, but went into default on the day after Amfac filed bankruptcy.
Northbrook would likely end up with the biggest stake in the new company. Amfac's reorganization plan must receive approval from the U.S. Bankruptcy Court.