KAHULUI, Maui — Maui Land & Pineapple Co. and its partners in the Kapalua Bay Hotel redevelopment have had to advance money to pay contractors after losing financing from the bankrupt Lehman Brothers, The Maui News reported.

Lehman had an agreement to loan $370 million for the project, or 61.6 percent of the total cost. But the investment firm filed for bankruptcy Sept. 15, a week before it had been scheduled to release the next funding installment. Other lenders provided 22 percent of the payment, but Lehman failed to release its share, or $27.7 million, according to a disclosure ML&P filed Friday with the Securities and Exchange Commission.

The redevelopment, which the company reported is 80 percent complete, involved demolishing the old Kapalua Bay Hotel and building 146 luxury residential condominiums in the Residences at Kapalua Bay and The Ritz-Carlton Club.

Without Lehman's financing, ML&P and its partners advanced money due on the project's construction contract. Ryan Churchill, senior vice president of Community Development, said ML&P drew on its cash reserves and lines of credit to come up with its share of the money.

"Our primary objective is to find a new lending source to carry us through the completion of the project," he said.

He said the company had received "a lot of interest" from possible lenders. But he acknowledged that even if the company does get new financing, it will likely come with much higher interest rates than it got in the 2006 deal with Lehman.

"Any new debt in today's market is more costly than it was back then," Churchill said.

The Wall Street credit crisis that has seen the collapse of Lehman Brothers and other financial giants is expected to be felt by other Maui developments.

Developer Everett Dowling, who is pursuing the expansion of Makena Resort, said he plans to complete projects that are already under way. But he has shelved proposals for new projects because of the difficulty in getting financing for resort developments, and because financing costs more when it is available.

He made that decision this summer, well before the Lehman failure.

"It's only gotten tougher," Dowling said Tuesday.

ML&P still says it anticipates healthy sales for its Residences. The company reported $310 million in presales, or about 40 percent of the units in the project. Buyers made 20 percent down payments on their units, which are priced from $4 million to $10 million, Churchill said.

Churchill was optimistic the sizable down payments would discourage buyers from defaulting, and that the project's superwealthy buyers would continue to have disposable income even as the rest of the country tightens belts.

"They're more immune," he said.

Those factors and the near completion make it a "solid project" attractive to investors even in the current economic climate, he argued.

The company acknowledged construction could be delayed if it can't find alternative funding. But Churchill said, "We don't see that as an option."

The Kapalua Bay projects are considered crucial for Maui Land & Pineapple's future profitability. For the last five years, real estate and development have been the company's only profitable segment, making up for multimillion-dollar losses in agriculture and resort operations. Development revenues led the company to an $8 million net profit last year.

Loss of project financing comes as Maui Land & Pineapple is facing other financial pressures.

The company reported $103 million in total long-term debt as of June 30.

It is also facing some major costs in the near future. Upon completion of the Kapalua Bay projects, ML&P has an obligation to purchase the spa and other amenities from its partners for $31 million. It also has $10.6 million in signed construction contracts for various real estate projects, according to its second-quarter earnings report.

ML&P contributed land worth $25 million and about $500,000 in cash for a 51 percent stake in Kapalua Bay Holdings. Its partners are Marriott International, which contributed $17 million, and Exclusive Resorts, which brought $7.5 million.

Steve Case, the majority shareholder of ML&P, also has a controlling interest in Exclusive Resorts.

Churchill said the company had hired an attorney to represent its interests in the Lehman bankruptcy.

He said the financing collapse last month came as a complete surprise.

"When you enter into an agreement with a company like Lehman Brothers, you never expect anything like this," he said.

For more Maui news, visit www.mauinews.com.