Legend Homes filed for bankruptcy protection on June 10 in U.S. Bankruptcy Court in Oregon. Legend was a small private builder, with only 770 lots owned, and its woes will not have a major effect on the Housing situation.
However, there was an article a couple of weeks ago in Builder Magazine, that shed some detail on the causes of the filing.
One interesting fact was that Legend Homes had a positive net worth when it filed. The court papers list $258 million in assets and $198 million in liabilities. Of course the asset value may have been stale at the time of the filing. Also, Jim Chapman, the president of Legend Homes, said in the article that the company was current with all loan payments to banks. So why am I writing about this? Chapman went into detail about how Key bank, one of Legend's lenders, tried to squeeze the company to put up more collateral:
"He points specifically to Key Bank, from which Legend has borrowed $22.3 million. Chapman says that Key attempted to use an earlier margin call to coerce cross-collateralization. “They wanted to take 100 percent of the closings on homes they didn’t even have construction loans for,” says Chapman. “And their approach has been to reappraise the land, say ‘here’s the margin’ and then ‘please remit $9 million.’ They’ve been very difficult.”
I assume this same thing could happen to a major publicly traded builder as well. Could this trip housing down even further? What if thousands of lots were forced onto the market suddenly? Just something to think about.
Wednesday, June 25, 2008
Legend Homes
Tuesday, October 23, 2007
Private Homebuilder to File Bankruptcy
Another one bites the dust.
"Neumann Homes, one of Chicago's largest homebuilders, announced on Monday that it intends to file for bankruptcy.
The company said in a press release at 5 p.m. that it had been "unable to procure adequate funding" to operate its business. Marketing director Jean Neumann said that despite other published reports, the bankruptcy had not been filed, though "it will be done shortly."
The company, ranked among the top 10 in Chicago, also builds in Wisconsin and Colorado. Company CEO Kenneth P. Neumann said in the statement that "significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation. ... Even after the significant help we have received from our lenders this year, the company can no longer weather this storm."
Neumann Homes Bankruptcy
