Preserving Favorable Financing in Bankruptcy

Section 1124 of the Bankruptcy Code allows borrowers to reinstate debt under certain conditions. Via Zero Hedge, an excerpt from a letter from Watchell Lipton reporting a settlement in the Spectrum Brands bankruptcy case:

Section 1124 of the Bankruptcy Code provides that if, pursuant to its Chapter 11 plan, a debtor cures all nonbankruptcy defaults under a debt instrument and does not alter the rights of the debtholders, the reorganized company can “reinstate” the debt on its original terms, without the consent of the debtholders. Thus, the success of a “reinstatement” strategy depends on the debtor’s ability to craft a feasible plan that does not violate the terms of the relevant loan documents and allows the debtor to remain in compliance with the loan’s terms post-bankruptcy. Because many secured credit agreements negotiated over the last several years have favorable interest rates and contain so-called “covenant lite” provisions (few or no financial covenants and permissive negative covenants), such companies have a strong incentive to try to take advantage of reinstatement.

Although I’ve not heard of the section being applied in a real estate case, this would seem to be a mechanism a borrower could use to restructure junior or mezzanine debt while leaving favorable first lien debt in place.

The complete Watchell Lipton letter can be found at the Zero Hedge post.

Getting Tilled: How a $6,425 Truck Loan May Decide the Fate of General Growth Properties

General Growth Properties, the bankrupt mall owner, has $27,700,000,000 in debt outstanding. The fate of the company will depend on the restructured terms of that debt. Those terms will probably be set according to a Supreme Court precedent which restructured a subprime truck loan.

Lee Till filed Chapter 13 bankruptcy and attempted to get the interest rate reduced on the loan secured by his 1991 truck. SCS, the lender, thought the rate should be 21%, because that was the going rate for loans to subprime borrowers secured by old trucks. The Supreme Court thought differently, and ruled the rate should be the Prime interest rate + 1.5%. The essence of the Court’s ruling is that in bankruptcy you start with Prime as a base rate and add a risk premium of 1-3%. You can find a summary of the case (Till, Lee, et ux. v. SCS Credit Corp., 2004) here and the syllabus which goes into more detail here.

If you’re a CRE lender, you might think that this doesn’t have anything to do with you. I know I felt that way, the first time I ran into Till a few months after the court ruled. How could the $12M fixed rate Fannie Fannie loan we serviced be repriced at Prime+1%? What about our yield maintenance provision? Why use Prime as a base rate? How could a large loan secured by a nice apartment project end up priced like a $6K loan on a 13 year old truck? When the borrower’s plan was confirmed, it seemed like a bad dream.

What’s even more surreal is this precedent will probably be used as the basis to reprice at least some of GGP’s $27B in debt. That’s what Bill Ackman of Pershing Square Capital Management is betting with his 7.5% stake in GGP’s outstanding common stock. Valueplays has a link to Pershing’s analysis of GGP’s value here. The discussion of the Till precedent starts on page 41. The bottom line is Ackman believes both that GGP’s debt will be extended, and the overall interest rate on their debt will be reduced.

Prime today is 3.25%, so a borrower in bankruptcy has a realistic shot at getting his loan restructured at a rate below 5%. That rate will allow a lot of partially leased income properties limp along. The risk of getting stuck with a low interest rate restructured loan is also keeping a lot of note buyers on the sidelines.

General Growth Properties and Distressed Sales

Pre-bankruptcy, General Growth Properties refused to sell properties at discounted prices. From an April 27, 2009 Bloomberg story:

Simon Property Group Inc., the largest U.S. shopping-mall owner by stock-market value, tried to buy real estate from rival General Growth Properties Inc. before it filed for bankruptcy, Chief Executive David E. Simon said.

“They didn’t realize they were a distressed seller,” Simon said in a panel discussion at the Milken Institute Global Conference today in Beverly Hills, California. Few commercial real estate sales are being completed because sellers aren’t willing to take losses on their investments, Simon said.

Is this likely to change now that GGP is in bankruptcy? It seems not. From a May 20, 2009 Bloomberg story:

General Growth Properties Inc., the mall owner that filed the biggest real-estate bankruptcy in U.S. history, may not have to sell any malls at discounted prices, said the head of rival Taubman Centers Inc.

“Even with a distressed owner of a good quality regional mall asset, you rarely, rarely see distressed pricing of those assets,” Chairman and Chief Executive Officer Robert S. Taubman said in a telephone interview. “If you’ve got a great one, no one’s going to want to sell an asset like that at a distressed price.”

…Taubman, whose Bloomfield Hills, Michigan-based company has 24 regional malls, said the court likely will support a plan by General Growth management to keep the company’s portfolio together and emerge from bankruptcy without selling off a large number of properties.

As I discussed in my post “Is General Growth Properties in Denial?”, the GGP bankruptcy was not about fundamentals, it was about maturing debt. That’s a problem that is relatively easy to solve in bankruptcy court without liquidating assets.

Is General Growth Properties in Denial?

The CEO of one of their largest competitors thinks so. From an April 27, 2009 Bloomberg story:

Simon Property Group Inc., the largest U.S. shopping-mall owner by stock-market value, tried to buy real estate from rival General Growth Properties Inc. before it filed for bankruptcy, Chief Executive David E. Simon said.

“They didn’t realize they were a distressed seller,” Simon said in a panel discussion at the Milken Institute Global Conference today in Beverly Hills, California. Few commercial real estate sales are being completed because sellers aren’t willing to take losses on their investments, Simon said.

With due respect to Mr. Simon, I don’t think that’s the real issue; the real issue is GGP doesn’t want to give up properties at fire sale prices when they can still service their debt. General Growth Properties report on first quarter results says their net operating income on consolidated properties was $509,085,000 while their interest expense was $328,489,000. That’s a 1.55 debt service coverage, which is generally regarded as a conservative ratio. Loopnet provides an example of an individual GGP property:

…the roll of loans added to special servicing in April only includes one substantial General Growth loan, a $165 million mortgage on the 939,085-square-foot Jordan Creek mall in West Des Moines, Iowa. The loan, securitized through JPMorgan Chase Commercial Mortgage Trust, 2005-LDP5, matured in March. According to servicer data compiled by Realpoint, the property generated $19.6 million of net cash flow last year. That's 1.8 times the cash flow needed to fully service its amortizing debt.

GGPs immediate problem is not the inability to pay debt service; it’s loan maturities. From their quarterly report:

The Company intends to pursue a plan of reorganization that extends mortgage maturities and reduces its corporate debt and overall leverage. We intend to work with our various lenders and other constituencies to emerge from bankruptcy as quickly as possible while executing on a plan of reorganization that preserves GGP's integrated, national business operations.

There’s no reason at this point to expect GGP can’t successfully reorganize in such a manner, because income at their properties is actually holding up fairly well (more on that at this Traffic Court post).

I’ve previously posted on the maturity issue and worked through the numbers in some examples here.

Complexity is not a Virtue

The General Growth Properties bankruptcy filing actually involved 166 entities (here's a link to the petition). To help everyone understand the relationships between the entities, a helpful organization chart was provided:

(Click on image for a larger version in a new window)

Clear? Oh wait, there’s more:

And more:

And more:

And more:

In fact, there are 25 pages of organizational charts like these. No doubt there were clever reasons to create this web of entities, but it seems obvious now that some of the intellectual firepower that created this rat’s nest should have been directed at managing debt maturities.

There isn’t any available data to test this hypothesis, but one of my rules of thumb is the risk of default is positively correlated with the complexity of the borrower’s organization.

Let the Judge Sort Them Out: How Bankruptcy Remote are Single Purpose Entities?

CRE lender standard operating procedure is to make loans to entities whose sole purpose is to own the real estate collateral. The goal (as I’ve posted about here) is to ensure the loan is not entangled in a bankruptcy related to other obligations of the borrower. From an Arent Fox article:

Lenders customarily require that the real estate projects they finance be owned by SPEs. In this context, use of the SPE structure is designed to confine the lender's risk to the particular real estate asset being financed and to avoid the problems encountered when a borrower with multiple assets files a bankruptcy petition…

The SPE structure will, in fact, isolate the property from other assets and focus the bankruptcy risk on the specific property.

So, the fact that the General Growth Properties’ bankruptcy filing includes a list 12 pages long of what appear to be more than 100 single purpose entities is causing some consternation. From Law 360, “For Commercial Market, Mall Giant May be 1st Domino:”

The number of entities that were listed on GGP's bankruptcy petition has raised the eyebrows of some attorneys who question the justification of putting solvent entities with no debt into bankruptcy in the first place.

Burroughs [Katherine A. Burroughs, a partner at Dechert] said a preliminary issue in the proceeding will be whether the court should allow the parent company to cause the independent entities to take on additional debt solely to benefit the parent.

“If GGP is successful in having these entities stay in, this could have a significant chilling effect on structured finance going forward,” Burroughs said, explaining that many structured finance deals are premised on keeping solvent entities out of the bankruptcies of parent companies.

Foley [Doug Foley, chair of the bankruptcy practice at McGuireWoods LLP] said GGP could have included these entities in the filing as a means of protecting them if the debtors had some cross-collaterization issues with other lenders.

They could also have been included to provide collateral to support the DIP loan, he said.

Nolan [Thomas Nolan, chief operating officer of GGC] said that the primary consideration for including certain properties in GGP's filing was the capital structure of each individual property, including the amount and terms of each property's mortgage.

Some properties were not included because they already have extended maturity dates, and there was nothing that could be gained from the restructuring process, Nolan explained.

A simple explanation could be that, although each asset is owned by a separate SPE, they are security for credit facilities which include many assets and which need a maturity extension (some of the org charts accompanying the filing support this theory). Or, it could be the bankruptcy equivalent of the Special Forces slogan, “Kill them all and let God sort them out.”

General Growth Properties’ Bankruptcy: An Example of a Balance Sheet Default

I’ve previously posted on the difference between an operating statement default (when deteriorating income means a borrower can no longer service its debt) and a balance sheet default (when a maturing loan can’t be paid off through sale or refinance). General Growth Properties’ bankruptcy filing is a result of a balance sheet default. From their press release announcing the bankruptcy filing:

The decision to pursue reorganization under chapter 11 came after extensive efforts to refinance or extend maturing debt outside of chapter 11. Over many months, the Company has endeavored to negotiate with its unsecured and secured creditors to obtain the time needed to develop a long-term solution to the credit crisis facing the Company. Unable to reach an out-of-court consensus, the Company reluctantly concluded that restructuring under the protection of the bankruptcy court was necessary. During the chapter 11 cases, the Company will continue to explore strategic alternatives and search the markets for available sources of capital. The Company intends to pursue a plan of reorganization that extends mortgage maturities and reduces its corporate debt and overall leverage. This will establish a sustainable, long-term capital structure for the Company…

“Our core business remains sound and is performing well with stable cash flows. We believe that chapter 11 is the best process for restructuring maturing mortgage loans, reducing the Company’s corporate debt, and establishing a sustainable, long-term capital structure for the Company,” said Adam Metz, Chief Executive Officer of the Company. “While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of chapter 11,” he said.

Look for many more bankruptcy filings on CRE properties by borrowers with similar goals.

This Time is Very Different: Attack of the Zombie Properties

The last time we had a severe CRE downturn was 1990 – 1995. For those of us who were around, the current situation feels similar – plummeting employment, deteriorating income fundamentals, spiking cap rates, and loss of liquidity in the market. However, there are some huge differences this time which have important implications.

First, some history. Here is a chart of cap rates taken from a paper by Philip Conner and Youguo Liang (Income and Cap Rate Effects on Property Appreciation, worth checking out):

Current value cap rates bottomed at around 6.7% in 1990, were around 8.25% in 1992, and peaked at around 9.5% in 1995. Based on the sales and appraisals I’m seeing and talk with colleagues, current cap rates seem to be in the 8% to 8.5% range, so today is somewhere around 1992 levels.

Now, let’s consider interest rates. A typical variable rate CRE deal in 1990 used an 11th District Cost of Funds index (COFI) plus 2.25%. An equivalent CRE deal in 2007 would have been priced at 30 day LIBOR + 2%. Here is how the interest rate would have changed on those two deals over the last 2 years:

Interest rates this time are much lower. In 1992, the cap rates were right around the interest rate, which meant a property with no equity also probably couldn’t make it’s payment. Today is much different; cap rates are 5.5% to 6% higher than the interest rate. This means a property could be severely under water and still make it’s payment. Here’s an example:

In an ordinary world, a property overleveraged to this extent would be foreclosed on and sold, but because interest rates are so low it can continue to make its payments.

What are the implications?

• CRE loans are collateral based, so under FAS 114 the bank probably needs to recognize the loss even though the loan payments are current. If the loan term is long enough, it’s possible the bank can make an argument the value will recover, and avoid recognizing the loss. But regulators and accountants these days tend to be pessimistic in their outlook, so the bank is probably stuck with recognizing the loss.
• If a bank attempts to foreclose on a basis other than a payment default (for example, loan maturity or a non-monetary covenant violation), the borrower will probably file bankruptcy. It is very difficult to obtain relief from stay and foreclose on a borrower willing to make their contractual interest payments (more on that here). So, the bank is probably stuck with the deal until interest rates go up and there is a payment default, unless they sell the note.
• If the bank sells the note for the collateral value, the return to the note purchaser is equal to the cap rate (in the example above, 8.25%). Note buyers are looking for returns in the 20% range, so these deals won’t appeal to them either.

I believe the result is we will have a lot of zombie loans on bank books, and a lot of zombie properties that are grossly overleveraged, but which can’t be cleared to market values because the borrowers can make the payments at today’s incredibly low rates.

Workouts 101: Bankruptcy Basics and the Problem With Non-Monetary and Loan Maturity Events of Default

CRE lenders who have led sheltered lives often believe the events of default listed in their deed of trust and loan agreements will allow them to foreclose on a property if a breach occurs. A material adverse change in the borrower’s financial condition? Unauthorized subordinate liens? The loan has matured? Let’s foreclose!

Sorry, it doesn’t work that way. Here are some bankruptcy basics (and I mean really basic; feel free to skip sections if you know about the topic headlined).

The Automatic Stay

If a borrower file bankruptcy, your foreclosure is automatically stayed. From the US Courts website, Bankruptcy Basics-Chapter 11:

The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. 11 U.S.C. § 362(a)… The stay provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor's financial situation.

Lifting the Automatic Stay

How do you get your foreclosure going again? You need to file a motion to lift the stay:

Under specific circumstances, the secured creditor can obtain an order from the court granting relief from the automatic stay. For example, when the debtor has no equity in the property and the property is not necessary for an effective reorganization, the secured creditor can seek an order of the court lifting the stay to permit the creditor to foreclose on the property, sell it, and apply the proceeds to the debt. 11 U.S.C. § 362(d).

It is very difficult to obtain relief from the automatic stay if there is equity in the property. The bankruptcy judge determines if there is equity or not based on evidence presented by the lender and the borrower. The lender presents an appraiser who thinks the value is low, the borrower presents an appraiser who thinks the value is high, and typically the judge decides somewhere in the middle. At this point in the cycle it is not hard for a borrower’s appraiser to support a high value given the value downturn has just started, so in most cases lenders will have a tough time getting relief from stay.

Adequate Protection

So you can’t foreclose. How long might this go on? The best case is for single asset entity real estate debtors (other debtors get longer to file a plan):

On request of a creditor with a claim secured by the single asset real estate and after notice and a hearing, the court will grant relief from the automatic stay to the creditor unless the debtor files a feasible plan of reorganization or begins making interest payments to the creditor within 90 days from the date of the filing of the case, or within 30 days of the court's determination that the case is a single asset real estate case. The interest payments must be equal to the non-default contract interest rate on the value of the creditor's interest in the real estate. 11 U.S.C. § 362(d)(3).

Bolding mine. This provision poses an obvious problem for non-monetary and maturity defaults – the borrower has been willing all along to pay you the interest payments. In fact, their plan will be to pay you your full contractual interest payments for a period they project will be required for the market to recover. That is a very confirmable plan, and as long as the borrower performs under it, no foreclosure.

So why do lenders put nonmonetary default provisions in their documents? In theory, they allow a lender to take action in a deteriorating situation before there is an actual monetary default. That works fine in a stable or rising market, because the threat of a foreclosure might motivate the borrower to sell or refinance. However, it doesn’t work well when the borrower has no exit.

The best use of non-monetary default provisions is to trigger an event other than foreclosure which enhances your security (for example, unauthorized liens often cause a non-recourse loan to become recourse). That might get you somewhere. Foreclosing on a matured loan or a non-monetary default rarely works out favorably for the lender in a declining market.

Workouts 101: Complete the Project!

If you have a construction loan in trouble, your focus needs to be on completing the project. Lansner on Real Estate tells the sad story of Atherton Newport’s Stonehaven development here.

An excerpt details the consequences of the project shutting down while on partially complete:

• After a year of standing idle, the development now is undergoing “forensic” inspections, examining the wood, the concrete slabs and the site to see what needs to be replaced and what can be salvaged.
• “There obviously is some weather damage and vandalism that has occurred,” Patton said. “Luckily, all the roofs are on.”
• Eight buildings have been standing with exposed wood framing and rusting nails. Seals around windows have been flapping in the wind, and drywall is stacked on floors inside the walls that have yet to be enclosed with tarpaper.
• Once inspectors determine the scope of materials that need to be replaced, the new owner will treat the structures for mold and termites and recertify the slabs.

Sometimes a project shutdown is triggered when the lender stops advancing funds. That was the case on a Staybridge Suites hotel in Chicago.

As described in this Chicago Real Estate Daily.com story from October, 2008:

Though the building’s shell is largely complete, construction crews walked off the job over the summer, a sign that CapitalSource had stopped advancing funds for the project. Subcontractors have filed liens with the Cook County Recorder seeking payment of more than $2.5 million for work on the building.’’

The loan was “out of balance,” and CapitalSource demanded that the joint venture come up with another $5.9 million in equity to bring the loan back into balance, according to the foreclosure complaint, which was filed earlier this month in Cook County Circuit Court.

The lawsuit doesn’t specify how the loan fell out of balance, but the loan agreement indicates that cost overruns could have pushed the construction budget higher than its original figure of $52.3 million, leaving the project with a funding shortfall. The loan is in balance only if remaining funds can cover remaining costs, according to a loan agreement filed with the complaint.

Often, if a bank is taken over by the FDIC there are transition problems. From a Nation’s Building News story in November, 2008:

Home builders with outstanding construction loans are reporting that they are having to stop work on new housing developments and are losing sales as the result of failed banks and thrift institutions being taken over by the Federal Deposit Insurance Corporation (FDIC).

“Builders with outstanding loans that are placed under FDIC control are frequently unable to contact a decision maker to deal with routine but time-sensitive matters related to loan draws or extensions,” NAHB President and CEO Jerry Howard said in a Nov. 20 letter to FDIC Chairman Sheila Bair…

Earl Snyder, a veteran FHA/VA home builder in Englewood, said that he has run into problems finishing eight homes in various stages of construction ranging from slab to almost finished. Six of the homes have already been sold to buyers with FHA mortgages. Although he was never late on loan payments, after being taken over by the FDIC his bank gave him 60 days to repay a $2.5 million construction loan.

In the case of the Stonehaven project, the the project seems to have been caught up in a much larger bankruptcy case. In a multicreditor bankruptcy action it can be difficult to fund additional advances to complete a project even if a lender wants to do so. Or, perhaps the developer realized they had no upside to the development and saw no point in working on it while the bankruptcy proceeded.

In any case, shutting down a partially completed project is one of the fastest ways to destroy real estate value.

Recourse and Judicial versus Non-Judicial Foreclosure

Many are firmly fixed on the idea that making a loan recourse reduces default risk. Here is Greg Mankiw, for example:

How might the feds ensure repayment of these mortgages? One possibility is to make them recourse mortgages (that is, the lender would have recourse to the borrower's other assets, if the borrower defaults and the house value falls below the mortgage principal).

In my experience this is not the case; I've talked about why here. In a nutshell, there are factors far more influential than potential loss of other assets that drive borrower behavior (for example, ability to pay).

Another reason recourse is rarely pursued by lenders is because it is invariably a judicial process. Non-judicial foreclosures through trustee sales are just that – non-judicial, with a fixed time frames, no hearings, and precisely known fees. Once you get attorneys, judges, and even juries involved in a process, both costs and uncertainty escalate dramatically.

This is especially true when judges are on unfamiliar territory. Back in the early 1990’s while working for an income property lender we were in court many times every week getting receivers appointed. Ordinarily this kind of work is allocated within a county to one or two judges, and given any kind of volume the attorneys and judge quickly get on the same page as to what’s expected and what the results would be. However, when the judge normally handling receiverships was on vacation, results were all over the map, because the substitute judge was not familiar with receiverships.

Processes and results also vary wildly between jurisdictions. Receiverships were routine in California, but almost impossible to obtain in Florida. A bankruptcy case which would have been resolved in 6 months in San Diego took 4 years and an appeal to the U.S. Supreme Court to resolve because it started out in Shreveport, Louisiana.

Finally, it is often the case that a lender’s effort to strip the borrower of their assets in addition to seizing the collateral gets a cool reception from judges and juries. From a recent MBA Newslink article:

Terry Hutchens, president of Hutchens, Senter & Britton, Fayetteville, N.C., told participants yesterday at the Mortgage Bankers Association's National Mortgage Servicing Conference and Expo that while lenders or mortgage servicing firms in the past might be given the benefit of the doubt in the event a home foreclosure case went to court, juries and judges in the current unfriendly judicial environment do not feel as inclined to cut mortgage firms or their attorneys any slack whatsoever.

"There has been a climate change," Hutchens said. "The pendulum has swung too far and we are not being treated fairly."

Recourse lending is not a panacea.

Workouts 101: Loan Modifications and Loss Recognition

Comments on some recent posts dealing with loan modifications suggest some people believe lenders can avoid recognizing losses by modifying loans (see Naked Capitalism "Cramdown and Future Mortgage Credit Costs", Mr. Mortgage "WAMU's New $1 Million 5-Year 1% Balloon Loan Mod", Credit Slips "Cramdown and Future Mortgage Credit Costs: Evidence and Theory") .

This is not the case.

The operative question is whether or not the modification constitutes a Troubled Debt Restructure (“TDR”). From a Center for Audit Quality guidance on the Application of FASB Statement 114:

3) How should an entity determine if a modification of the terms of a residential mortgage loan would be considered a troubled debt restructuring under Statement 15?
In accordance with paragraph 2 of Statement 15, “a restructuring of a debt constitutes a troubled debt restructuring … if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.”

This covers virtually all material modifications (certainly substantial interest rate reductions or bankruptcy cramdown modifications).

If a loan is a TDR:

Statement 114 provides guidance on how an entity should measure impairment. Specifically, paragraph 13 of Statement 114 states: “…a creditor shall measure impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. … The creditor may choose a measurement method on a loan-by-loan basis. A creditor shall consider estimated costs to sell, on a discounted basis, in the measure of impairment if those costs are expected to reduce the cash flows available to repay or otherwise satisfy the loan.”

All of which is to say the loan needs to be marked to market. So, while a modification may postpone the actual cash loss on a deal, on the financial statements the loss needs to be recognized at the time of the modification.

Is it possible a lender could use overly optimistic cash flow assumptions to defer and/or minimize losses? Absolutely, but examiners are sensitive to this possibility, and TDRs get a lot of scrutiny during exams.

Crowe Horwath provides a good general overview of TDRs here.

Bankruptcy Ripple Effects: Lehman and Goats R Us

Every real estate bankruptcy has a ripple effect on vendors who don’t get paid because the property owner withheld payments prior to the filing and/or the bill wasn’t paid as a consequence of the normal billing/payment cycle. From the Wall Street Journal:

A Lehman-financed venture owes a company called Goats R Us about $53,000. The goats performed fire-prevention by munching shrubs and grass on a property the venture owns in Oakland, California…

About $43 billion of Lehman's $639 billion in assets was from the firm's far-flung real-estate operations, which included housing projects, resorts, office buildings and other properties all over the world. Those hurt include hydrologists near San Francisco and chambermaids in Palm Springs. Also left in the lurch were Chinese laborers who were flown into the Turks and Caicos Islands in the West Indies to help build a Ritz-Carlton resort.