Time running out on Amfac loan
By Andrew Gomes
Advertiser Staff Writer
A foreclosure case to take over two Maui golf courses is moving ahead while negotiations continue between the state Employees' Retirement System and an Amfac Hawaii LLC subsidiary over a $66 million loan the company is required to pay off June 30.
The retirement system, a multibillion-dollar pension fund for Hawai'i's state and county government employees, made the loan in 1991. It has had problems collecting interest payments since 1995.
Last August, fund officials filed a foreclosure lawsuit to take over two Maui golf courses used as collateral for the loan, but entered into a "standstill agreement" in which the case was put on hold for six months.
The waiting period expired March 26.
Monday, the fund's board of trustees met with attorneys in a closed-door meeting to discuss appropriate action.
Retirement system officials did not return calls requesting comment. Don Gelber, legal counsel for the fund, said it would be inappropriate to comment because the matter is before the court.
Executives at Amfac Hawaii, formerly known as Amfac/JMB Hawaii Inc., did not respond to requests for comment. But a spokesman said the company is continuing to negotiate with retirement system officials.
The last time Amfac Hawaii agreed on restructured loan terms with the retirement system was in 1996 when the fund extended the loan for five years.
Under that arrangement, the fund was to be paid principal and interest plus a share of any increase in the value of the courses.
In a filing with the Securities and Exchange Commission last week, Amfac Hawaii said it withheld interest payments due last year because of insufficient golf course cash flow and because the lender hasn't granted a property easement.
The 18-hole golf courses, the North and South links at Ka'anapali Beach resort, face strong competition from other Maui courses, according to the filing, which added that improvements in tourist arrivals and their length of stay "may be critical" to improving course finances.
In September, a month after the retirement system sued, Amfac Hawaii made a partial interest payment of $3.8 million, followed by additional payments totaling $1.7 million through April 2.
In December, an affiliate of Amfac Hawaii owner Northbrook Corp., acquired 83 percent of Amfac Property Investment Corp., the Amfac Hawaii subsidiary that borrowed $66 million from the retirement fund.
Amfac Hawaii now holds a 17 percent stake in the courses, but is the one continuing to negotiate with the retirement fund over the loan, the filing said.
The company is the contemporary incarnation of what was at one time Hawai'i's largest corporation, Amfac Inc., which was acquired in 1988 by Northbrook affiliate JMB Realty Corp. of Chicago.
After losses and maturing debt payments in recent years, Amfac Hawaii has been selling land and shutting down operations. Last year, the company closed two sugar mills on Kaua'i, laid off 400 employees and is selling 17,000 acres of land.
On Maui, where the company owns about 10,000 acres, Amfac Hawaii sold the land and plans for the Kaanapali Ocean Resort to Starwood Vacation Ownership, which is now developing it.
On O'ahu, Amfac Hawaii owns 152 acres, including Waikele Golf Course.
Amfac Hawaii, whose parent lost ownership of Hawai'i retailer Liberty House in a bankruptcy case concluded last month, continues to have financial troubles.
Last year, the company lost $51.8 million, compared compared with $19.9 million in 1999 and $41.7 million in 1998.
Andrew Gomes can be reached by phone at 525-8065, or by e-mail at agomes@honoluluadvertiser.com.
