Orleans Homebuilders Inc., after failing last month to receive an extension of a $350 million credit facility, yesterday filed for bankruptcy protection in Wilmington.
While operating under an extension granted by its 17 senior secured lenders in mid-December, Orleans found a potential buyer for the company but was unable to complete a sale before the new loan maturity date of Feb. 12, Orleans said in a news release.
That is when Orleans, hammered by the housing downturn that left homebuilders with huge numbers of unsold houses, defaulted on the loan. Some of the senior lenders had refused to agree to another extension, forcing the company to attempt to reorganize or sell the firm under Chapter 11 of the bankruptcy code.
Garry P. Herdler, Orleans Homebuilders' chief financial officer, declined to comment beyond the court filing and the news release.
Orleans, which has an agreement for $40 million in financing to use while in bankruptcy, pending court approval, said it would operate without interruption. The company also said it asked for court permission to continue all home warranty programs.
The company said it believed that all customer deposits were protected in segregated escrow accounts and would not be affected by the filing. Closings that had been temporarily postponed during the last two weeks will now resume, the company said.
"We regret the hardship that this filing will have on many of our trade suppliers," said Jeffrey P. Orleans, chairman and chief executive officer of the company, which traces its roots to 1918.
Major unsecured trade creditors include 84 Lumber Co. in Eighty Four, Pa., owed $1.47 million; Robert K. Foster Inc., a plumbing contractor in Newfield, N.J., owed $1.15 million; and Sunrise Concrete Co. in Rushland, Bucks County, owed $677,234. In all, Orleans owed $17.74 million to trade contractors listed in the bankruptcy filing.
The largest unsecured creditors are entities known as collateralized debt obligations created by Taberna Realty Finance Trust, a Philadelphia company that merged with RAIT Financial Trust in 2006.
Orleans owes those entities $93.75 million, according to the bankruptcy filing. RAIT, also of Philadelphia, sold its interests in the CDOs last summer.
Overall, Orleans said it had assets of $440 million and liabilities of $498.8 million, including total debt of $419.1 million, at the end of last year.
"We have done everything we could to generate cash flow and to reduce operating expenses in light of falling home prices and reduced housing demand, yet still provide a high level of service to our many customers," Jeffrey Orleans said. "We reduced our bank debt by approximately 40 percent, from $513 million at January 1, 2007, to approximately $311 million today," he said.
Orleans shrank dramatically as the housing market collapsed. Its current workforce is about 300, down from 990 in June 2006.