William Lyon Homes of Newport Beach, California, files for Chapter 11 bankruptcy protection with plans to reduce debt by US$180M, asks court to approve prepackaged restructuring plan

Wendy Lisney

Wendy Lisney

Dec 20, 2011 – William Lyon Homes

NEWPORT BEACH, California , December 19, 2011 (press release) – --Petitions Filed to Facilitate Pre-Packaged Chapter 11 Plan of Reorganization

--Debt to be Reduced by $180 Million Resulting in a Reduction of Nearly $25 Million in Annual Cash Interest

--Commitment Secured for $30 Million Credit Facility to Ensure Liquidity During Case

--Operations to Continue Normally and Trade Creditors to be Paid in Full Under Proposed Plan

William Lyon Homes, which develops new home communities in California, Arizona and Nevada, today announced that it has filed voluntary Chapter 11 cases to seek confirmation of the pre-packaged Plan of Reorganization after obtaining overwhelming support from both its Senior Lender and Senior Noteholders. In excess of 97% in dollar amount and in excess of 93% in number of holders of its senior notes that cast ballots, voted to approve the pre-packaged Plan, as did the Company's senior secured lender. The Lyon family also supports the Plan.

"Today's action enables us to efficiently restructure our debt and create a capital structure that will provide a foundation for future growth," said Chief Executive Officer General William Lyon. "Over the last several months we have worked closely with our stakeholders to develop and implement our plan to ensure William Lyon Homes remains a leader in the homebuilding industry."

The Plan approved by the Company's key stakeholders provides new capital investments of $85 million and strengthens the Company's long-term capital structure by eliminating short-term debt maturities and reducing interest expense. Approximately $180 million in principal amount of debt will be eliminated as part of the recapitalization plan resulting in a 37% reduction in overall debt. Annual cash interest expense will be reduced by nearly $25 million or approximately 45% of current levels. Existing senior management -- including Chief Executive Officer General William Lyon, President and Chief Operating Officer William H. Lyon and Executive Vice President Matthew R. Zaist -- will continue managing the Company and the Lyons will remain on the Board of Directors, with General Lyon continuing as Chairman to ensure the continuity of the business.

-- Key elements of the plan: The Lyon family will invest $25 million in exchange for 20% common equity (before dilutive impact of warrants) and warrants for an additional 9.1% of common equity;

-- The senior secured lender will receive a $235 million secured note;

-- Senior noteholders will exchange $284 million in principal of existing senior notes for $75 million in secured notes;

-- Senior noteholders will also receive 28.5% common equity (before dilutive impact of warrants); and

-- The Company will propose a rights offering, to be fully backstopped by one of the Company's largest note holders, for $10 million in common equity and $50 million in new convertible preferred equity, together representing 51.5% common equity on a fully converted basis (before dilutive impact of warrants).

In addition, the Company has secured a commitment for a new $30 million credit facility from its senior secured lender, which will be used to support operations and ensure adequate liquidity during the restructuring process.

"We are gratified by the commitment our senior secured lender is demonstrating by providing this new credit facility," said William H. Lyon, the Company's President and Chief Operating Officer. "The added resources should assure our customers, trade partners and the communities we serve that William Lyon Homes has the financial flexibility to complete our recapitalization process efficiently."

During the reorganization process, which is expected to be successfully completed in less than 90 days, William Lyon Homes will continue normal business operations. The Company intends to continue to pay trade creditors and suppliers in the ordinary course of business. The Company said it has taken steps to ensure that all of its customer programs continue without interruption -- including its comprehensive warranties.

"This is excellent news for our homebuyers, trade partners, vendors and employees because it paves the way for a promising and long-lasting future for William Lyon Homes and its long-term viability," said Executive Vice President Matthew R. Zaist. "We are extremely grateful for the support of all of our constituents and look forward to completing the restructuring in the coming months."

For more information about the restructuring, please visit www.lyonhomes.com .

Lyon Communities is a separately owned and operated multifamily real estate company. Lyon Communities is not included or affected by the recapitalization plan and Chapter 11 filing.

About William Lyon Homes

William Lyon Homes is primarily engaged in the design, construction and sale of new single-family detached and attached homes in California, Arizona and Nevada. Its corporate headquarters is located in Newport Beach, California. For more information about William Lyon Homes and its new home developments, please visit its website at www.lyonhomes.com .

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