Property group Woodbridge files for bankruptcy amid SEC probe

(Reuters) - Luxury real estate developer Woodbridge Group of Companies filed for Chapter 11 bankruptcy on Monday, citing costs of expansion, litigation and a government fraud investigation.

Robert Shapiro, who resigned as Woodbridge’s chief executive officer on Friday, had gained attention last year when he bought the Owlwood Estate in Los Angeles, the storied former home of stars such as Tony Curtis and Cher, for $90 million.

The U.S. Securities and Exchange Commission has been investigating Sherman Oaks, California-based Woodbridge, which calls itself a leading developer of high-end real estate, since 2016 for possible fraudulent sales of securities, according to court documents.

Woodbridge said it also had received inquiries from about 25 state regulators about its securities sales and the alleged offer and sale of unregistered securities by unregistered agents.

The company, which also specializes in lending and alternative financing, said it would fully cooperate with regulators.

The privately owned company owes about $750 million to an estimated 8,998 noteholders, according to documents filed in the U.S. Bankruptcy Court in Delaware.

Woodbridge operates through a complex network of more than 250 affiliated companies owned by RS Protection Trust, of which Shapiro is the trustee and his family members the sole beneficiaries.

Turnaround specialist Lawrence Perkins of SierraConstellation Partners has taken over as chief restructuring officer, but Shapiro will continue to receive a $175,000 monthly consulting fee during the Chapter 11 proceedings, according to court papers.

The company said in the documents that the fee was justified due to Shapiro’s unique business experience and to ensure his cooperation with the restructuring, which it expects to complete next year.

Woodbridge said it had settled three of the state inquiries and was in advanced talks with authorities in Arizona, Colorado, Idaho and Michigan when it filed for Chapter 11 protection.

The company said it planned to use the bankruptcy proceedings to restructure $750 million in debt and had already obtained a commitment for up to $100 million in debtor-in-possession financing from Los Angeles-based Hankey Capital.

The financing was secured by a first priority lien on 28 properties, the company said, adding that Hankey was also willing to consider providing bankruptcy exit financing.

Reporting by Tracy Rucinski in Chicago; Additional reporting by Tom Hals in Wilmington, Delaware; Editing by Lisa Von Ahn