Nothing in here about Aberdeen Forge in this Kara rebirth, but interesting

news nonetheless.



PLAN OFFERS HOPE TO BUYERS

Posted by the Asbury Park Press on 06/29/07

BY MICHAEL L. DIAMOND

AND DAVID P. WILLIS

BUSINESS WRITERS





Kara Homes Inc. plans to emerge from bankruptcy within the next several

months with a new name, a new owner and fewer developments, according to

documents filed Thursday with U.S. Bankruptcy Court.



The plan, if approved, paves the way for the builder, renamed Maplewood

Homebuilders LLC, to complete 471 homes in 13 of Kara's projects. Of those

homes, 129 were already under contract when Kara filed for bankruptcy last

fall.



It also calls for the ouster of Zuhdi Karagjozi, the Rumson resident who

took the home builder to dizzying heights before a sudden crash.



One of the projects on the list for completion: Cottage Gate in Middletown,

where residents have coped with unfinished homes, roads and landscaping.



"I'm thrilled," said Margie Rafferty, a Cottage Gate resident. "We can get a

little more established in the development."



East Brunswick-based Kara filed for Chapter 11 bankruptcy in October with

assets of $350 million and liabilities of $227 million. The builder said it

was devastated by the downturn in the residential real-estate market.



It left the deposits of home buyers and the money owed to subcontractors in

jeopardy. Since then, Kara has reached agreements with lenders to complete

some projects with the help of outside investors, while selling other

projects.



The disclosure plan gave insight into how the company plans to emerge from

bankruptcy. It calls for Maplewood Homebuilders to be owned by Glen Fishman,

a Lakewood developer who has been instrumental in Asbury Park's

redevelopment, and Plainfield Specialty Holdings II Inc., a hedge fund based

in Greenwich, Conn.



The investors said the plan has the support of Kara's major creditors, and

the company will change its name to Maplewood Homebuilders when the plan is

approved. They then expect to invest more than $200 million to complete 13

of the projects that stalled when Kara filed for bankruptcy. A hearing

before U.S. Bankruptcy Judge Michael B. Kaplan is scheduled for July 6 in

Trenton.



"After a period of turmoil and uncertainty for many home buyers, we are

excited about the proposed reorganization," said Kevin Fiore, a spokesman

for the new company, in a statement released by Fishman. "It represents a

wonderful opportunity for current and prospective buyers in these

communities to forge ahead with the construction of their quality homes."



Buyers with contracts in homes that are going to be completed can move

forward by negotiating new deals or opting for their existing deals with the

builder, said Warren A. Usatine, a Hackensack lawyer representing unsecured

creditors.



Unsecured creditors, including subcontractors and home buyers with canceled

contracts, will split $2.25 million, depending on the size of their claims.

They also will receive a share of the proceeds from the sale of any

development that won't be built by the new company, Usatine said.



An earlier version of the reorganization plan called for unsecured creditors

to receive $500,000, plus $5,000 for every home sold. As of April, unsecured

creditors were owed about $30 million.



Some of those buyers are trying to recoup their down payments by filing

claims with bonding companies.



"I think it is a very fair deal," Usatine said. "It was hard negotiations

and at the end, in light of where the case began, I think it is a very fair

result for unsecured creditors."



Since April, Kara has sold 10 uncompleted developments and has plans to sell

three more. In some projects, buyers are in limbo. For example, Amboy

National Bank is trying to find a buyer for Kara's Horizons at Birch Hill in

Old Bridge. Otherwise, it will foreclose on the project.



Neither Plainfield nor Fishman are new to the story. Plainfield, part of

Plainfield Asset Management LLC, has loaned Kara $7 million to keep the home

builder's operations going, which helped Kara avoid liquidation.



The hedge fund, founded in 2005, manages more than $2 billion in investments

from wealthy people, according to its Web site. Many of its investments are

in distressed companies, including FAO Schwarz, a toy retailer.



In January, Plainfield acquired Smart Papers, a paper production company

based in Hamilton, Ohio, that had recently emerged from bankruptcy. In

February, Plainfield and a partner teamed up to invest in Wolverine Tube

Inc., a copper manufacturer based in Huntsville, Ala., that had run into

financial trouble.



The hedge fund is working with Fishman, who has worked with the investment

group M.D. Sass to redevelop Asbury Park. Fishman's interest in Kara was

disclosed in April, and since then he has taken a more visible role in the

company.

Fishman met last week with residents of Kara's Horizons at Woodlake Greens

in Lakewood and told them their development would be completed.



Eric Reehl, managing director of Plainfield Asset Management, did not return

a call for comment.



Left out is Karagjozi, who as recently as April appeared to have an

ownership stake in the restructured company. But the plan said Karagjozi's

shares in the company will be terminated, and he won't receive an interest

in the new company.



It marked a sudden end for Karagjozi, who started Kara in 1999 and within

three years turned it into what a trade publication said was the nation's

fastest-growing builder - a remarkable feat given New Jersey's reputation

for slow growth.



Karagjozi didn't return a call for comment. Neither did Kara's chief

restructuring officer, Perry Mandarino, nor Kara's bankruptcy attorney,

David Bruck.



One expert said Karagjozi's departure isn't a surprise. A hedge fund might

replace management of a home builder to restore credibility with lenders.



"In bankruptcy situations, especially in situations that are owner-managed,

once you buy out the owner you might take over management for yourself,"

said Radhakrishnan Gopalan, a finance professor at Washington University's

Olin School of Business in St. Louis. "The key (question) is, what does the

existing manager or CEO bring to the table?"

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