Meruelo Maddux Properties said Wednesday it had stopped making payments on 26 real estate loans totaling $266 million, and that independent auditors were likely to issue a "going concern" opinion questioning the company's ability to remain in business.
The largest landowner in downtown Los Angeles, which made the statements in its fourth quarter earnings announcement, also said it was seeking to renegotiate its debt but that effort might not be successful.
"We are currently seeking loan workout agreements with four depository lenders on loans that total approximately ($178 million)," the company said in a statement. "We are unsure as to what results will be derived from such efforts and are exploring various restructuring options."
Meruelo-Maddux has a portfolio of several dozen commercial and industrial properties projects and is developing two residential projects. It has been hurt for months by slow leasing and liquidity issues. A plan last May to increase liquidity by selling up to $300 million in stock, debt and a chunk of its portfolio reportedly at heavily discounted prices wasn't well received.
Meruelo Maddux began 2009 with $4.5 million in unrestricted cash, but said Wednesday it would need to generate an additional $28 million in income annually to cover current cash shortfalls. The company said its unrestricted cash balance would cover just 2.5 months of required payments unless it was able to sell some of its mortgage properties. Although some properties are in escrow to be sold none of the sales have closed so far this year.
The company a fourth quarter net loss of $85.8 million (-98 cents per share), compared with a net loss of $2.6 million (-3 cents) a year ago. Revenue rose nearly 4 percent to $6 million.
Prior to the announcement, the company's shares closed down a penny to 11 cents on the Nasdaq.
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