NEW YORK CITY-Citing deterioration of its loan portfolio following the collapse of the market for securitized debt, Petra Fund REIT and its parent Petra Offshore Fund L.P. filed for Chapter 11 protection Thursday. The filing at US Bankruptcy Court in Manhattan lists assets of between $1 million and $10 million against liabilities of $100 million to $500 million.
In court documents, Petra, led by president and CEO Andrew Stone, cites the judgment won against it this past spring by Newport Beach, CA-based KBS Preferred Holdings I LLC over debt arising from an unsecured loan. Petra says it tried unsuccessfully to negotiate with KBS following the May judgment by New York Supreme Court Judge Eilleen Bransten and the creditor’s commencement of enforcement action.
According to an SEC filing, KBS in October 2007 made a pair of $25-million interest-only loans to Petra. Bransten’s May ruling notes that Petra made no payments on the loans.
Petra says in an affidavit supporting the bankruptcy filing that under the terms of a restructuring agreement in principle with a secured creditor that holds a lien on its Petra CRE CDO 2007-1, which provides financing for “a substantial portion” of the REIT’s real estate transactions, it’s required to file for Chapter 11 protection. The REIT is affiliated with Petra Capital Management, which serves as manager of the $1-billion CDO.
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