Real Estate

Rumors of a pool-table-top murder within an uninhabited Hollywood Hills mansion’s billiards room: false.

The one about aliens landing on the 22-acre property, giving them a clear view of the Los Angeles skyline and the whitewashed Hollywood sign: false.

Speculation about the soft pink Mediterranean home’s owner filing bankruptcy papers, desperate to avoid a foreclosure auction: true.

A Delaware bankruptcy judge rejected embattled Los Angeles Dodgers owner Frank McCourt’s attempt to use the team’s Chapter 11 case to circumvent Major League Baseball, ruling Friday that the team could not use a $150 million loan from a New York hedge fund to finance its operations. Read the Daily Bankruptcy Review article here.

Given the state of commercial real estate, the prospect for defaults by commercial borrowers has greatly increased. The last time there was a significant downturn in the commercial real estate sector in the early 1990s, owners of buildings and other real estate often turned to Chapter 11 bankruptcy as a method of buying time and, in some cases, lowering or at least restructuring the amount of secured debt against the real property through a plan of reorganization. This raises the question -- will the same story play out again in this downturn?

The Fall 2009 edition of the Absolute Priority newsletter, published by the Cooley Godward Kronish LLP Bankruptcy & Restructuring group, of which I am a member, has just been released. The newsletter gives updates on current developments and trends in the bankruptcy and workout area.