Press Release

Morrison & Foerster Secures Trial Victory for JPMorgan Chase in Involuntary Bankruptcy Petition and Trustee Appointment for Distressed Development Outside of Las Vegas

10 Feb 2011

Las Vegas, NV (February 10, 2011) – Morrison & Foerster secured a trial win on February 3, 2011 for JPMorgan Chase Bank, N.A. in its petition for an involuntary Chapter 11 bankruptcy against South Edge LLC, a developer of a stalled master-planned community called Inspirada. JPMorgan Chase also secured the appointment of a Chapter 11 trustee for South Edge.

Following a four-day trial, Judge Bruce Markell of the U.S. Bankruptcy Court in Nevada granted the involuntary Chapter 11 bankruptcy petition filed by JPMorgan Chase, and co-lenders Wells Fargo Bank, N.A. and Credit Agricole Corporate and Investment Bank. The Court also granted JPMorgan’s motion for the appointment of a Chapter 11 trustee to oversee South Edge’s estate and the Chapter 11 case.

The petitioning banks are members of a lending syndicate owed over $367 million in principal and interest from South Edge. Debtor South Edge is a Nevada limited liability company whose members include affiliates of major US homebuilders KB Home, Toll Brothers, Inc., Meritage Homes Corp., Beazer Homes USA, Inc., Pardee Homes and Focus Group South, LLC. South Edge has appealed the decision.

The credit facility was extended to South Edge in connection with the purchase of land and development of Inspirada, a 2,000-acre master planned community located in the Las Vegas suburb of Henderson, Nevada. Since early 2008, South Edge has been in default under the credit facility and has halted all development of Inspirada.

JPMorgan, Wells Fargo and Credit Agricole filed the involuntary bankruptcy petition in December 2010, claiming that since March 2008, South Edge has not timely paid its debts as they became due and has mismanaged the Inspirada project to the detriment of South Edge and its creditors. The banks asserted that due to a deadlock in management caused by the homebuilders’ self interest, management has not undertaken any meaningful efforts to recommence the project, to obtain the proceeds of available municipal financing for infrastructure, nor to renegotiate agreements with the City of Henderson or the lenders.

Relying on evidence presented at trial, the Court granted the involuntary petition and directed the appointment of a trustee to oversee South Edge for its own benefit and that of its creditors, including the City of Henderson and Inspirada homeowners.

JP Morgan Chase was represented by a team of attorneys from Morrison & Foerster, including partners Mark Edelstein (real estate), Larry Engel (bankruptcy), James Hough (litigation), Jamie Levitt (litigation), and Norm Rosenbaum (bankruptcy).

The law firm of Lewis and Roca led by partner Robert Charles represented JPMorgan Chase Bank, N.A. and Wells Fargo. Credit Agricole was represented by Charles Beckham and Christopher Castillo of Haynes and Boone, LLP.

The case is in re South Edge LLC, 10-32968, U.S. Bankruptcy Court, District of Nevada (Las Vegas).

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