GlobeSt.com UPDATE: Sunterra Settles Finova Debt

Sunterra had a debt load of $850 million when the once high-flying timeshare developer filed for protection in May 2000. The bankruptcy petition showed the timeshare firm had $1 billion of assets in 89 global resorts. Cypress Pointe Resort in Orlando is one of Sunterra's more successful properties.

Sunterra paid off Finova from a $210 million, court-approved term loan package it had received in April 2001 from Greenwich Capital Markets Inc. of Greenwich, CT. The $105 million payoff to Finova equates to a discount from par of about $25 million, Sunterra officials say in a prepared statement.

"The settlement with Finova represents a substantial benefit to our reorganization process," Gregory F. Rayburn, Sunterra's chief restructuring officer, says in the same statement. "It resolves various disputes between Sunterra and Finova, and the payment to Finova reflects a significant discount from the amount of Finova's fully secured claims."

Rayburn says the Finova payoff "frees up additional cash flow fo our operations and allows us to access additional financing under our debtor-in-possession financing agreement."

The deadline for Sunterra to repay the loans to Greenwich has been extended to April 30 of this year and could be extended again to June 30 if Sunterra meets certain financing requirements.

"We have worked very closely with our creditors to develop a plan of reorganization that should be accepted and executed this spring," Rayburn says.

The reorganization plan calls for the developer to pay off all secured and debtor-in-possession claims. Then the new Sunterra company would issue stock and warrants to satisfy unsecured claims, according to the company's statement.

"We will be very well positioned to executive this plan when it is confirmed and when emerge from the constraints of Chapter 11," Sunterra CEO Nick Benson says in the same statement. "We are looking forward to re-establishing ourselves as market leaders upon conclusion of this process."