The managers of EFO Holdings LP noticed what they thought was a pattern emerging during the last six months - more developers seeking Chapter 11 bankruptcy protection.

For EFO Holdings, which helped fund Holmes Beach's Tidemark Lodge and Marina after it filed for Chapter 11 bankruptcy, those distressed builders represent potential clients.

EFO Holdings is a family-owned investment company that offers an unusual investment product: funding for businesses, particularly developers, who have sought Chapter 11 bankruptcy protection but cannot find funding elsewhere. It's called debtor-in-possession lending.

EFO Holdings, which stands for Esping Family Office Holdings, manages more than $250 million in unleveraged capital. Its vast portfolio includes debt and public equity, real estate, and venture capital, among others. It also has an interest in a range of businesses throughout the country, such as hotels, the Laser Spine Institute in Tampa and the Melbourne Greyhound Track.

The company, with headquarters in Dallas and an office in Naples, focuses its debtor-in-possession lending on southwest Florida companies that are short on cash at a time they are trying to reorganize.

But their territory is beginning to expand, said David Goduti, managing partner of EFO Financial, which runs the debt side of the company's portfolio.

Goduti estimates that inquiries to EFO have increased by 50 percent during the last six months. The company has struck deals in Orlando, Jacksonville and the Flagler County area. "Now that the market has turned a bit, I think we'll be doing a lot of traveling," he said.

The combination of hyper-inflated land prices, construction costs that have risen 25 percent to 30 percent, higher interest rates and slower sales have left some developers with a cash-flow crunch.

"We're seeing a lot of guys coming in, loaded up on land . . . couldn't get enough of it," Grammen said. "Now they're long on inventory but sales are short."

Goduti called the company unique because unlike other debtor-in-possession lenders - or lenders in general - EFO only deals with distressed companies with real estate that can be used as collateral.

"It's (real estate) a nonperforming asset on a publicly traded company's books," Goduti said. "We're not publicly traded, so it's OK if we have to be in real estate in six to nine months."

Banks historically stay away from debtor-in-possession lending, leaving it to private individuals and companies, said Chris Pennewill, senior vice president of People's Community Bank.

EFO charges between 10 percent and 18 percent for debtor-in-possession loans in the $1 million to $15 million range. The term commitments range from one to three years but the average term is nine months.

They are typically "last in and first out" when it comes to funding debtors-in-possession, meaning they are the last to lend money and first to get paid. They often hold the senior position in creditor hierarchy, superceding other previous secured creditors.

The company has provided a term sheet to possibly fund GSR Development LLC, the high-profile island developer that recently sought Chapter 11 bankruptcy protection.

EFO loaned money to Manatee's Nick Easterling before and after the developer filed for Chapter 11 protection in early 2004 after a partnership to build the Tidemark Lodge and Marina in Holmes Beach fizzled.

"I was fortunate to have EFO there and have people I know who knew them," Easterling said. "We got a very quick and meaningful relationship together."

EFO also made a debtor-in-possession loan to help complete the Twin Eagle Golf and Country Club in Naples. The company ran into a cash-flow problem when environmental challenges arose over its right to have water and sewer services.

The delays cost the developer about $200,000 a month. He had an offer to sell the property as-is for $34 million. With the loan of almost $7 million, he completed the project for an end value of $60 million.

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