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— Bankruptcy —
 The mortgage mess continues to reverberate for, among others, the homebuilder.As The Deal's John Blakeley precisely predicted in 2007: The perfect storm of plummeting home prices, continued subprime delinquencies and tight credit markets will likely continue in 2009 and beyond, crippling more and more builders along the way. Bloomberg notes May 26 that "housing hitting bottom by June means fewest starts since 1945." Not good news for the homebuilding sector, where bankruptcies abound. In fact the question isn't really which builders can avoid restructuring their massive debt loads, but what avenue builders will ultimately take to get there: a Chapter 11 filing or out-of-court negotiations with lenders. There's no one hard-and-fast rule, Blakeley pointed out. But here's the latest on some of the largest builders and most interesting cases that have gone the way of bankruptcy of late:
May 19: Homebuilder Kirk Corp. will ask
a Chicago judge for permission to continue selling its properties. The
company filed for Chapter 11 on May 12 with nine subsidiaries, blaming
what it called a "sharp and prolonged decline" in Chicago's
homebuilding market. - Carolyn Okomo April 2: Fleetwood can access DIP: A California judge granted Fleetwood Enterprises Inc. interim approval to borrow from its $80 million debtor-in-possession loan from a group of banks led by Bank of America NA. Fleetwood, a Riverside, Calif., manufacturer of prefabricated homes and recreational vehicles, filed for Chapter 11 protection on March 10 with 30 affiliates. Meanwhile, Las Vegas homebuilder Rhodes goes under: Unable to make $11.4 million worth of interest payments on its first- and second-lien debt, Nevada homebuilder Rhodes Design and Development Corp. has filed for bankruptcy protection. - John Blakeley Meanwhile, Kimball Hill exits Chapter 11: Illinois homebuilder Kimball Hill Inc.'s Chapter 11 liquidation plan has taken effect as of March 24. Rolling Meadows, Ill.-based Kimball, once one of the largest privately owned homebuilders in the country, filed for Chapter 11 protection on April 23, blaming a "crisis of epic proportions" in the industry. And, Tousa will wind down: Fellow homebuilder Tousa Inc. announced March 23 that it too would abandon attempts to reorganize. - John Blakeley Feb. 26: WL Homes gets interim DIP use: Irvine, Calif. homebuilder WL Homes LLC, once among the nation's 50 largest, begins reorganization efforts with a $30.88 million debtor-in-possession loan. - Jamie Mason Jan. 27: Mercedes Homes files Ch. 11: Facing a maturity on its first-lien debt, Melbourne, Fla.-based homebuilder Mercedes Homes Inc. filed for bankruptcy protection. The company said in court filings that it is the 20th-largest homebuilder in the U.S. - John Blakeley Nov. 11: Pacific Lifestyle can sell its homes: A Washington judge has given Pacific Lifestyle Homes Inc. final approval to sell finished homes to pay back secured debt. The Vancouver, Wash.-based company filed for Chapter 11 on Oct. 16. - Kevin Fung Sept. 22: Buying spree, housing slump undercuts Lincoln Logs: Lincoln Logs Ltd. has collapsed under the weight of a crumbling housing market that has rendered a 2003 acquisition spree impossible to support. The company filed for Chapter 11 Sept. 19. - Ben Fidler Sept. 17: Oriole Homes plans asset sale: Oriole Homes Corp. plans to sell itself and its 10 subsidiaries through an alternative bankruptcy. The 45-year-old Boca Raton, Fla., homebuilder filed an assignment for the benefit of creditors petition, or ABC, on Aug. 22 in the Palm Beach County Circuit Court in West Palm Beach. - Mike Schoeck
SHADES OF GRAY "Taken as a whole, 2007 will be remembered for its unprecedented
housing industry decline -- a slump involving not just the companies
that create housing stock, but also the lenders that provide the
mortgages so people can buy it." So began a Dec. 17 article from Blakeley.
So when will the U.S. residential real estate market recover? The National Association of Realtors, April 1, 2009 contended: "The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008 when it was 83.3." The findings cite tight mortgage availability for the decline. Meanwhile, housing starts for February 2009 rose unexpectedly, CNNMoney.com noted, citing the latest numbers from the Commerce Department. And according to the latest from Standard & Poor's S&P/Case-Shiller Home Price Indices: "Data through January 2009 ... shows continued broad based declines in the prices of existing single family homes across the United States, with 13 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10% versus January 2008." Fitch Ratings Dec. 13, 2007 outlined two scenarios for how the several months to follow could play out: Under one, year-over-year new home sales comparisons would probably bottom out late in 2008, with starts following suit three to six months later. Under the other, new home sales and starts wouldn't bottom out until mid-2009.BANKRUPTCY CALLING Heading toward year's end 2007, November and December saw a string of filings.
After an S&P downgrade and a pretax $115 million third-quarter loss, WCI Communities Inc. looked like it could be next, Dealscape's Gerald Magpily noted Nov. 20. On Nov. 9, Levitt and Sons LLC, which developed Long Island's Levittown for WWII vets, the homebuilding unit of Levitt Corp., and 37 affiliates succumbed to bankruptcy protection. The 70-year-old homebuilder is the largest to seek protection this year, according to The Deal's Bankruptcy Insider, with assets of more than $400 million and 200,000-plus homes built. Fellow builder Dunmore Homes Inc. of Granite Bay, Calif., filed for protection the same day. (Dunmore won approval of its disclosure statement June, 10 2008.) And kicking off the month, Chicago homebuilder Neumann Homes Inc. collapsed into bankruptcy Nov. 1, little more than a week after warning it was coming.Securities litigation firm Coughlin Stoia Geller Rudman & Robbins LLP on Jan. 25 filed a class action against Levitt, alleging it didn't relay to investors just how severe the problems were within its homebuilding unit. The company had two DIPs cleared Jan. 14 so it could continue building and selling homes to pay down debt. And Dunmore's case went back to California on Jan. 14, where most of its assets and creditors are, after the debtor's official committee of unsecured creditors and several smaller creditors, alleged its move to seek protection in New York was "forum shopping" to limit creditors' some access to proceedings. As The Deal's David Elman pointed out in 2007, many builders have continued to brave the storm. And even in December some builders were managing to eke out sales. Lake Oswego, Ore.-based Buena Vista Custom Homes Inc. said Dec. 17 it sold 141 homes in a weekend auction, where 240 were up for sale, for a collective $65 million. Meanwhile, of the many builders to go bankrupt, one of note was New Jersey luxury homebuilder Kara Homes. Elman detailed Kara's fall from grace: "A charismatic owner borrows heavily to finance his business only to be left with more debt than he can pay back when the market turns south. But this bankruptcy has been anything but normal, assuming an almost Jekyll-and-Hyde quality. After a slow start, the case is now frenzied. On one side, there's been a stream of debtor-in-possession financings, sales and the filing of a reorganization plan. On the other side, some lenders have grown impatient, feeling that presiding Judge Michael B. Kaplan could be moving things along even faster. Some lenders have already bolted, selling off their claims. "One problem was Kara's complexity. Thirty-three of its affiliates followed it into bankruptcy. And between the hundreds of homebuyers doubling as creditors and all the different pools of collateral backing the claims of prepetition lenders, Kara's case created a new standard. 'It's 33 debtors,' says Sam Della Fera Jr., special counsel to Kara at Trenk, DiPasquale, Webster, Della Fera & Sodono PC. 'It's multiple secured creditors and numerous construction lien holders and contract purchasers.' " Despite a move by its founder and sole equity holder, Zuhdi Karagjozi, to block it, the New Jersey homebuilder won final approval of its disclosure statement on Monday, July 30. Kara will sought confirmation Sept. 12 and emerged Oct. 1. CO-HABITATING
In 2006:
NO HELP FROM MY FRIENDS Bankruptcy for homebuilders can be tricky. While Chapter 11 is designed to provide relief, builders need court approval for every house sale, and if they are defined as a single-asset real estate, or SARE, company, debtors are given the later of 90 days after a bankruptcy filing -- or 30 days after the court hands down the SARE designation -- to file its reorganization plan or begin making monthly interest payments to secured creditors. If the builder fails to do so, creditors are freed from the automatic Chapter 11 stay and free to move against assets. THE OTHER SIDE OF THE FENCE So will things get better? The consensus is yes, but when is the subject of debate, illustrated by several Reuters pieces over the 2007 summer. "David Seiders, chief economist at the National Association of Home Builders, said that while his forecast is a lot weaker than the previous one he gave in late 2006, due primarily to the deterioration of the subprime mortgage market, 2007 will see the worst of the housing market's slump," Reuters reported July 25. "Countrywide Financial Corp. Chief Executive Angelo Mozilo said the U.S. housing market is unlikely to recover before 2009, as lenders and homeowners work through oversupply, stagnating home prices, and the excesses of recent lax lending standards in much of the mortgage industry," Reuters reported July 24. "Home builders at the Reuters Real Estate Summit in New York this week said they didn't expect any improvement until 2008 at the earliest. And even then, their expectations are modest," Reuters reported June 28 following a real estate summit in New York. BANKING (AND DEFAULTING) ON IT For the enterprising, it looked as if there was opportunity. But even the homebuilders that were able to draw investment weren't necessarily in the clear. Bonita Springs, Fla.-based WCI saw the election of Carl Icahn to its board of directors in 2007. Icahn unveiled in January taking a stake in the company, which then turned to Goldman, Sachs & Co. the next month to advise on an auction. Icahn unveiled plans for a tender offer a month later and in August, WCI's board announced its slate of candidates -- including Icahn and two of his choosing. The slate won approval Aug. 30. The company then teetered on the edge of bankruptcy, Dealscape's Magpily pointed out, as S&P lowered its credit rating to CCC from CCC+ with a negative outlook after WCI 89 customers defaulted on contracts and the company recorded a pre-tax loss of $115 million in the third quarter. Magpily wrote: "Not even corporate raider Carl Icahn has been able
to change the direction of WCI. Earlier this month, Icahn reported the
first quarterly loss in his three-year-old hedge fund, Icahn Capital
Management LP, because of big bets on WCI and Lear Corp." Meanwhile, Levitt agreed in January to sell out to Florida homebuilder BFC Financial Corp. for $286 million. BFC backed out of the deal in August. Visit the complete Dealwatch ArchiveComments
From: tpellasce,
I am manage townhomes where the developer turn the property over to the Board and then went Bankrupt. Many owners have construction issues what recourse do they have if any.
Posted on:
July 7, 2009 4:50 PM
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From, Montes Orthopedic
Steven Montes, located in Tucson.
I was responsible for having dumped thousanda, and thousands of gallons of the second hottest chemical into an unlined waste dump created by the City of Tucson, in 1963, this dump has never been cleaned up, is still a hazzand to the people living in Tucson. See my site that tells all about this cover-up. at:
http://arizona.typepad.com/blog/2007/02/government_by_c.html