Chapter 11 Settlement Plan

Holders of a Florida development’s tax-exempt “dirt bonds” are battling a court order that could make it more difficult for owners of at least $2.9 billion of defaulted debt involving Fiddler’s Creek Community Development Districts to get paid by excluding them from a Chapter 11 settlement plan.

Is is one of the single biggest default events in the history of the municipal market, which is nearly $5.1 billion, or 77 percent of those issued since 2003, having taken place in Florida, according to Bloomberg reports.

Creditors Frustrated With Chapter 11 Settlement Plan

The owners of the $100 million of dirt bonds sold by Fiddler’s Creek Community Development Districts now know debt payments will begin after those to other creditors of Fiddler’s Creek LLC, the bankrupt builder of a 4,000-acre (1,600-hectare) community in Naples, on Florida’s west coast.

Dirt bonds are sold by community development districts established by builders to pay for utility lines and roads on newly developed housing land. Florida issued almost 400 in the $7 billion outstanding.

The disaster started with Florida’s economic and real estate downturn which continues.

In bankruptcy restructuring, debts are let go by a court order based on a careful reorganization plan. Creditors are in line for payment by what funds are available and do not want their debts dismissed.

This case, Florida’s first where a development district settled debts with a builder under Chapter 11 bankruptcy procedures over bondholders’ objections, may prompt more Chapter 11 filings by builders looking to delay bond payments. Florida has many developers filing bankruptcy or who have bankruptcies pending.

It means that bondholders supposed to be first paid are now last.

When deciding whether to file Chapter 11 bankruptcy in Florida, consult with Central Florida attorneys Roddy Lanigan and Eric Lanigan to carefully and successfully present a business restructuring plan.