CalPERS, the nation's largest pension fund, has hired Morgan Stanley to review seven land deals that it made with joint venture partners, according to Bloomberg News.
"CalPERS is doing a case-by-case review, and of course there could be some restructuring," a company spokesman told Bloomberg.
Even if it does undertake a restructuring, CalPERS will likely not be able to recoup much of the $970 million it invested in LandSource, which filed for Chapter 11 protection in Delaware on Sunday, after reaching an impasse with its lenders over the restructuring of more than $1 billion in secured debt.
CalPERS invested in LandSource through a venture with MW Housing Partners II LP, an investment fund managed by MacFarlane Partners LLC.
Though Bloomberg reported that CalPERS' venture with LandSource is one of the deals the fund is reviewing, CalPERS may have little recourse because under the U.S. Bankruptcy Code, equity holders are at the bottom of the recovery chain and are often completely wiped out during a Chapter 11 case.
But as CalPERS spokesman Clark McKinley told The Associated Press, even such a worse-case scenario "is not critical" to the fund. CalPERS' $970 million investment in LandSource is less than one-half of a percent of the value of the fund's total investment portfolio, which is valued at around $244 billion. - John Blakeley
