T.H. Properties L.P., the Harleysville home builder that abruptly ceased operations last week as lenders and suppliers began closing in, yesterday filed for Chapter 11 protection in U.S. Bankruptcy Court in Philadelphia.
The filing means that the builder, which has 12 working developments in Pennsylvania and New Jersey, will seek to reorganize its operation in an effort to resume business.
Buyers have hundreds of thousands of dollars in deposits on houses in THP developments, while people who went to settlement in the days and weeks before THP suspended operations still await completion of landscaping and driveways.
The Chapter 11 filing, signed by Timothy Hendricks - partner with his brother, Todd, in the firm they started in 1992 - lists assets of $100 million to $500 million and liabilities of $10 million to $50 million.
Montgomery County Court records show that two banks, Wachovia and Continental, are suing the Hendrickses and THP for a total of $26 million in loans they want repaid. Vendors and subcontractors have an additional $550,000 in mechanics' liens against the company.
Industry sources say THP's total indebtedness is closer to $150 million, but the records show amounts much less than that.
The IRS has liens against the brothers for $1.1 million each for nonpayment of taxes in 2007, court records show.
A reorganization plan was not filed with the Chapter 11 petition. The builders will have to present one to a bankruptcy judge within 120 days, during which they must negotiate with their creditors.
The petition did not include details on how THP got where it is, but it did list the company's top 20 unsecured creditors, including subcontractors and materials suppliers.
If the secured creditors - THP's 18 lenders - accept the reorganization plan, the company will likely try to complete whatever houses were under contract. If the creditors reject the plan, they could take over THP's operations, find a third party to take over through a bankruptcy auction, or liquidate the assets to try to satisfy the debt.
Bankruptcy law requires that secured creditors be paid first, then assigns six levels of priority to unsecured creditors. The law assigns a seventh-rank priority claim for each affected homeowner in the amount of $2,500, with a $5,000 total for a husband and wife, said William D. Schroeder Jr., a bankruptcy lawyer in Colmar.
The bankruptcy action, filed in Philadelphia at 2:13 p.m., influenced deliberations miles away on a project THP has had pending since 2002 in Upper Salford Township, Montgomery County.
The township was due to act on plans for the Normandie Golf Course Community, a 175-home development with 18 holes of golf, at a late-afternoon meeting.
But the three-member Board of Supervisors opted not to vote until it is clear how that would dovetail with the bankruptcy suit.
Solicitor Stephen P. Imms Jr. said THP's attorney had advised him that implicit in the Chapter 11 filing was a stay preventing any parties from doing anything to hurt THP's financial state. The township will explore whether or not to challenge the stay. A call to THP for reaction wasn't returned.
The development would replace 309 acres of farmland near Old Skippack, Shelly, and Schwenksville Roads.
"I think they're taking the proper step," planning commission chairman John Giannini said. "We'll see how it plays out."