MSREF-backed Crescent emerges from Chapter 11

Crescent Resources, the property developer and manager with land in the South East and South West US, has exited bankruptcy protection after wiping $1bn of debt from its balance sheet and securing $150m in exit financing.

Crescent Resources has exited bankruptcy protection one year and one day after voluntarily filing for Chapter 11.

The Charlotte, North Carolina-based developer, jointly owned by Morgan Stanley Real Estate Investing and Duke Energy Corporation, said it had “eliminated” more than $1 billion of debt from its balance sheet, and secured $150 million in exit financing from a group of lenders led by UBS and Aladdin Capital.

The capital injection will help refinance Crescent’s outstanding debtor-in-possession borrowings, fund exit costs and provide working capital for the firm, which develops mixed-use complexes involving residential, office, industrial and retail space in the South East and South West. Crescent previously said it had secured $110 million debtor-in-possession financing from existing lenders.

A bankruptcy court approved the company’s reorganisation plan last month, with Crescent emerging from bankruptcy protection today. “[It] is a very proud day for Crescent Resources,” said Andrew Hede, a managing director with Alvarez & Marsal North America, who was named Crescent chief executive officer and chief restructuring officer last year.

Under the terms of the reorganisation plan, secured debtholders received a combination of reinstated debt and 100 percent equity of the company, while unsecured creditors received an interest in a litigation trust. Various project-level lenders have also had their existing debt reinstated, the firm said in an earlier statement.

Morgan Stanley Real Estate Investing bought a 49 percent stake in Crescent Resources, originally a real estate subsidiary of Duke Energy Corp, through its $1.75 billion MSREF V vehicle in 2006. A Bloomberg report at the time said MSREF paid $415 million cash for the stake, and assumed $656 million of debt, for a total contribution of $1.07 billion.

Duke retained a 49 percent share, while Crescent chief executive Art Fields owned the remainder. As part of the deal, Crescent borrowed $1.2 billion of new debt, with most of it distributed back to Duke. At the time, the transaction valued Crescent at $2.1 billion.

Crescent Resources is unrelated to the US REIT Crescent Real Estate Equities, which Morgan Stanley handed back to Barclays Capital last November. The bank paid $6.5 billion for the REIT in 2007, including the assumption and refinancing of approximately $3.1 billion of debt, with plans to put Crescent's assets into real estate investment funds. The deal was never transferred to MSREF.