Baldwin Credit Line Approved : Construction: Bankruptcy judge allows an interim financing plan that extends $70 million to the O.C. building company. Checks to subcontractors will be issued today.

SANTA BARBARA — Baldwin Building Co. was given interim approval Thursday for a $70-million credit line that will allow the company to resume business, start closing on escrows today and pay $8.5 million to subcontractors.

“We’re back in business,” said a jubilant Alfred Baldwin, the company president who with his brother, co-owner James, attended the daylong Bankruptcy Court hearing here.

The checks to subcontractors will be issued today and should allow building on homes in seven projects in four Southland counties to resume as early as Monday.

The resumption of business came as U.S. Bankruptcy Court Judge Robin L. Riblet approved an interim financing plan that reinstates the firm’s $60-million revolving credit line with General Electric Capital Corp. and allows the lender to provide an additional $10 million under a new credit line.

Ironically, it was GE’s decision to pull its credit line that forced Baldwin into bankruptcy July 18.

The Connecticut-based lender’s decision to resume business with Baldwin evoked wry comments from the judge, who had listened to attorneys for GE criticizing the Baldwin brothers’ management techniques and their extravagant personal lifestyles.

“We’re friends for now,” said James Baldwin, who added that the agreement does not bar the Baldwins from suing GE for activities that led up to the bankruptcy.

Commenting on the about-face by GE, Riblet told its attorney, Irving Sulmeyer, that she found it “interesting that much of Mr. Sulmeyer’s time Monday was spent attacking the debtors.”

“If that is [GE’s] business judgment, I will not overrule it, although Mr. Sulmeyer did make a particularly compelling case” against the Baldwins on Monday, Riblet said.

A final hearing to approve the two-year credit line is scheduled for Sept. 18 in Santa Barbara.

Thursday night, the company had little information for about 20 people who attended a homeowners’ association meeting in the Summit Court development in Anaheim Hills.

John Walker, Baldwin’s head of customer service and warranties, said he had heard nothing about the day’s events in Bankruptcy Court. A Baldwin Co. vice president who is on the Summit Court association’s board, Jim Birmingham, was at another homeowner group’s meeting Thursday night, Walker said.

Residents asked Walker about maintenance, landscaping, parks and unfinished construction. Frank Nosalek, treasurer of the Summit Court association, said “These are the questions I wanted to ask Jim Birmingham tonight, and I’m disappointed that he is not here. I am a homeowner here and I’m very concerned.”

Board President Jim Thomaston told the members that he didn’t think their community would be in bad shape because most of the homes are already built.

He added: “The reality that needs to be spoken here is we’re probably real small fish to the Baldwin Co.”

On Monday, the Baldwins had proposed replacing GE as their company’s principal source of operating funds with a $20-million credit line from Foothill Capital Corp. GE, however, objected because the deal would have given Foothill a priority over GE as a creditor in the case.

Riblet then ordered the Baldwins to sit down with GE and come up with a business solution to the stalemate. The two sides negotiated for 14 hours Tuesday to come up with the compromise approved Thursday.

An attorney for Baldwin Co.’s unsecured creditors committee, which includes the investment houses that own $155 million of Baldwin bonds as well as contractors and suppliers who are owed an estimated $25 million, said there were several objections to the agreement that would be argued later.

Although the day was largely spent arguing points of law, there was one point of humanity when the Baldwin brothers asked for, and the judge agreed to, an immediate ruling that would allow a Thousand Oaks couple to close escrow Thursday. The couple was not identified, but the Baldwins had been informed that their lender would not wait until this morning.

Thursday’s decision allowed the Baldwins to pay subcontractors for work done before the bankruptcy filing, because bankruptcy law generally prohibits payment of debts incurred before the financing. However, Riblet said it was in the interest of everyone to keep the Baldwin Co. going.

“I will approve payment of . . . the $9,536,000 in the motion and not a penny more,” Riblet said. The company also was allowed to pay employees for wages held up by the bankruptcy.

However, a debate about huge raises for the Baldwin brothers that were approved just before the bankruptcy evaporated Thursday when Riblet pointed out that the law slaps a 15-day moratorium on compensation to corporate insiders.

The U.S. trustee’s office must approve any payment of the raise, which would have boosted the Baldwin brothers’ salaries to $950,000 a year from $130,545.

Most creditors were not available for comment Thursday. However, an attorney for the Ebensteiner & Co., an Agoura Hills grading contractor, said his firm was hopeful that it would get some of the estimated $10 million it is owed.

However, it’s unlikely this ruling will have much impact on Ebensteiner’s claim, because most of the $9 million to be paid out today goes to a long list of subcontractors currently working for the Baldwins.

“Ebensteiner is owed a lot of money,” said Andra Greene, the Newport Beach attorney for the subcontracting firm. “We would be thrilled,” if the Baldwins began paying their debts, Greene said.

The Baldwins and their families own several airplanes, luxury homes in the exclusive Emerald Bay community near Laguna Beach, a 120-acre ranch with a 7,000-square-foot house in Montana, a yacht, a fleet of off-road race cars, and vacation homes in Cabo San Lucas.

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Times staff writer Debora Vrana and Times correspondent Lesley Wright contributed to this report.