One of Arizona's largest private builders, Fulton Homes filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Arizona Jan. 27. According to the filing, Fulton owed between $100 million and $500 million to over 100 creditors. A creditor list had yet to be filed.
"We filed for Chapter 11 reorganization in order to continue operating without tremendous bank interference," Fulton Homes CEO Doug Fulton said in a statement. "Financially, we are in better shape now than before the filing."
The company stated in bankruptcy documents that funds will be available to pay unsecured creditors. Fulton has hired Shughart Thomson & Kilroy, P.C. to represent the company during the reorganization. Fulton also pointed out that Fulton Homes Sales Corp., the arm of the company that sells and supplies warranties for the builder's homes, was not involved in the bankruptcy filing.
"Of the many lenders we use to finance land acquisition and development, a distinct minority has taken action against Fulton Homes due principally to the current valuation of our land holdings," Fulton said. "By filing for Chapter 11, Fulton Homes can protect our business, retain our value, and continue to properly service our customers."
"During Chapter 11 reorganization, Fulton Homes will continue to build homes, pay subcontractors, service our warranties, and keep our communities looking great," he added. "The main impact will be to the length of time it takes us to develop future communities."
Fulton Homes has been in operation for more than 30 years and currently has 21 communities in the Arizona market. Residential real estate activity in the state has been struggling, with new-home sales overshadowed by foreclosures. According to Trulia.com, 17,593 homes recently sold and there are 17,733 foreclosures on the market.
Fulton told Big Builder last month that the company was in the process of unveiling an aggressive strategy to deal with foreclosure competition while also bringing in new business.
Radio commercials were aired locally, cautioning buyers of the pitfalls they can encounter when purchasing a foreclosure and directing them to an online tool that details why a new-home purchase is a better move financially.
The builder further promised that if after a buyer looks at a Fulton Home and still wants to purchase a foreclosure, its sales staff will help them with the process. No statistics were available regarding the success rate of the company's marketing efforts to abate pressure from foreclosures.