A prominent Central Texas developer is seeking breathing room from its lenders.
San Antonio-based Casey Development, led by CEO Darren Casey, filed for Chapter 11 bankruptcy protection on Feb. 2 in the U.S. Bankruptcy Court for the Northern District of Texas. The case ropes in 31 affiliated entities that control a mix of multifamily, retail and other properties across the state, with roughly $196 million in debt tied to the portfolio, the San Antonio Business Journal reported.
The filing came after Randolph-Brooks Federal Credit Union and Fifth Third Bank issued default acceleration notices on loans totaling about $7.4 million and $44.6 million, respectively. Most of the debt is backed by properties in the San Antonio and Austin areas and is personally guaranteed by Casey.
Jefferson Bank, American National Insurance Company and FirstBank Southwest are also among the developer’s largest creditors, according to the outlet.
In court last week, Garrick Smith of Munsch Hardt Kopf & Harr, representing Casey, told Judge Edward Morris that a confluence of factors pushed the firm into bankruptcy. He cited shifting economic conditions in Central and South Texas, construction delays, rising costs and funding challenges. Softening effective rents and increased concessions in the multifamily market added pressure to cash flow.
“Obviously there’s been in Central and South Texas some lower effective rates and concessions that have had to be made, as the market has shifted,” Smith said, adding that the goal is a “global solution” to avoid piecemeal foreclosures and further acceleration notices.
The court agreed to consolidate the 31 entities into a single proceeding, a move that could streamline negotiations but also heightens tension among lenders with exposure to stronger assets, according to the publication.
Kenneth Ottaviano, counsel for Fifth Third Bank, objected to Casey’s request to use cash collateral to cover administrative expenses, warning it would amount to robbing “Peter to pay Paul.” The bank argued that cash-flow-positive properties tied to its loans should not subsidize weaker entities. Judge Morris ultimately allowed the use of cash to pay staff, taxes and other obligations over Fifth Third’s objections.
Casey has enlisted Douglas Brickley, managing director at Houston-based Stout Risius Ross, as chief restructuring officer.
Casey Development was founded in 1992 and has primarily focused on projects within the Austin-San Antonio corridor. The company has either developed or acquired more than 3 million square feet of industrial, multifamily, office, retail and self storage space since 2000, according to its website.
— Eric Weilbacher
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