Bankruptcy judge approves Fiddler's Creek reorganization plan

A bankruptcy judge has approved a reorganization plan for the developer of Fiddler's Creek.

A bankruptcy judge has approved a reorganization plan for the developer of Fiddler's Creek.

A bankruptcy judge has approved a reorganization plan for the developer of Fiddler’s Creek.

At a court hearing in Tampa on Friday, Judge K. Rodney May confirmed the plan, which has been more than a year in the making.

“I think it’s for the best, at least as far as the residents of Fiddler’s Creek are concerned. There are obviously some parties that won’t agree with that for various reasons,” said Phil Brougham, a retiree who has lived in Fiddler’s Creek since 1999.

More than 17 months ago, the developer, Fiddler’s Creek LLC, filed for Chapter 11 bankruptcy protection under a mound of debt. At the time, it had $165 million in mortgage debt, in addition to owing millions to bondholders who put their money in so-called “dirt bonds,” which helped finance roads, utilities and other start-up needs as the project came out of the ground.

Brougham, president of one of two community development districts in Fiddler’s Creek, which are responsible for collecting assessments to pay back the dirt-bond investors, listened to the court hearing by phone. He said the judge “overruled most of all the objections that had been filed against the plan.”

“The people here, for the most part, thoroughly enjoy living here,” he said. “This is like a cloud that has been hanging over this development for 18 months. It’s always good to see that the cloud may be lifted.”

He said the judge spent nearly an hour summarizing all of the key testimony, as well as the objections to the plan.

Under the reorganization plan, a new company will be formed to continue as the master developer of Fiddler’s Creek, an expansive luxury golf course community near Marco Island. Aubrey Ferrao — the founding developer of Fiddler’s Creek — will be the principal shareholder in the new company.

Ferrao could not be reached for comment. Neither could his Miami-based attorney, Paul Battista.

Fiddler’s Creek, off Collier Boulevard, is planned for 6,000 homes in about 100 neighborhoods. Fewer than 2,000 homes have been built.

With the reorganization plan, $90 million in mortgage debt will be wiped out and the developer, going by a new name, will get $45 million in new working capital to continue the project.

The developer proposes to pay off the remaining creditors over time as the real estate market strengthens and the demand for new homes and lots improves in Collier County.

Going forward, the developer’s focus would be more on selling lots to other builders, rather than building and selling homes itself. The plan includes selling 91 lots to builder DR Horton for more than $100,000 a piece.

“Uncertainty is a bad thing for anyone. Hopefully we can go forward from here,” Brougham said.

Larry Hepler, a member of the steering committee that represented Fiddler’s Creek golfers in the bankruptcy case, said his group supported the reorganization plan. With it, he hopes for “a very bright future going forward.”

He said it’s favorable to the community’s active golfers, protecting the rights of those who may eventually want to resign their membership and get out of the club.

There could still be an appeal of the judge’s decision.

“Some might think it’s all over,” Brougham said. “But let’s wait and be sure.”

The bondholders, who are owed more than $100 million, didn’t support the plan. They say it sets a bad precedent, putting them last in line to get their money when they have the most to lose.

Bondholders did not have a vote on the plan because they are creditors of the community development districts, not the developer. Both districts, which had a vote, supported the plan.

Andrew Sanford, a portfolio manager for ITG Holdings LLC in Naples, one of the buyers of the bonds, said as a single group the bondholders had the most money at risk, yet “somebody else was able to vote on our economic interest.”

“As far as an appeal or anything like that, I can not comment on any sort of legal strategy the indentured trustee might be taking,” he said. “That’s who is in charge of protecting the bonds, on behalf of the bondholders.”

ITG bought more than $23 million in bonds in a distressed sale after they went into default, but later sold more than $8 million of them to fellow holders, who wanted more control.

Under the reorganization plan, the developer, which still owns much of the land in Fiddler’s Creek, will not have to start paying assessments to the community development districts for the bonds until April 2012 or later, Sanford explained.

The assessments, which were to be collected twice a year, are how the bondholders get repaid, he said. The reorganization plan sets a new precedent in bankruptcy court, Sanford said.

“This court changed the security for the payment of our bonds,” he said. “There is no way around it.”

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