One of the state's largest active construction projects, the Ritz-Carlton Club and Residences at Kapalua Bay, is "in jeopardy" after lender Lehman Brothers cut off funding last month.

In a Thursday filing in the Lehman bankruptcy case in New York, developer Maui Land & Pineapple Co. said buyers who put down deposits on the $370 million luxury project could demand their money back if construction is not completed by the first quarter 2009.

"Lehman has failed to honor its funding obligations and thus the project ... is in extreme jeopardy," wrote MLP's Los Angeles attorney Richard Wynne.

Shares of MLP dropped 19 cents to close at $15.58 cents on the New York Stock Exchange yesterday.

MLP spokeswoman Teri Freitas Gorman said the court filing describes a worst-case scenario and that the company is seeking alternative sources of funding for the West Maui project.

The project is 83 percent complete and the partners are current on payments to its contractors. More than $200 million of the project's $370 million in financing has already been funded, MLP said.

The 146-unit Ritz-Carlton Club and Residences is being developed by Kapalua Bay Holdings LLC. MLP owns 51 percent of Kapalua Bay and Marriott International owns 34 percent. Steve Case's Exclusive Resorts LLC owns the remaining 15 percent.

In its court filing, MLP said Lehman was supposed to provide a $35.6 million loan installment on Sept. 22 but failed to do so. Lehman failed to provide another $20 million in financing, which was due yesterday.

Lehman filed for bankruptcy protection Sept. 15 because of mounting losses from the subprime mortgage market.

MLP said the lack of funding prompted general contractor Nordic/PCL to send Kapalua a notice of default. MLP said it is in talks with Nordic to prevent a foreclosure action, which could shut down the project.

MLP and Marriott also provided an emergency bridge loan to the project to continue construction.

MLP added that it is holding talks with other lenders but none of them want to commit new money unless their loans are given priority over those made by Lehman.

The company is asking U.S. Bankruptcy Judge James Peck to order Lehman to decide whether to fund the rest of the loan or reject it so another lender could step in. A hearing is set for Nov. 18.

"There are five hundred employees working full-time on this development ... nearly all of whose jobs are at risk," MLP attorney Wynne said.