Orleans Homebuilders, which originally planned to liquidate itself in bankruptcy, filed a reorganization plan Aug. 12 that would resurrect the company with half the debt it had when it filed for Chapter 11 bankruptcy protection March 1.

The plan, which requires approval of its creditors as well as the presiding judge's blessing, would slough off more than $200 million of the $400 million in debt the company had in March.

Among those who would absorb the losses would be the company's existing stockholders, who are traditionally at the end of the line of creditors looking to be repaid. The plan calls for old stock to be wiped out and new stock to be issued to the company's secured creditors who are higher up in the payment pecking order.

The old debt will be wiped out, and the new debt of $125 million will be issued, again with the new notes being held by some of the current creditors.

It was the holders of the company's debt who had bought the paper from the original owner that engineered the recreation rather than the dissolution of the company. The company cancelled its plans to liquidate as well as an auction to sell its assets in May after the debtholders said they would support keeping the 90-plus-year-old company as a going concern.

"We have spent the past few months negotiating with those holding more than 80% of the company's secured debt to reach an agreement in principle with respect to a reasonable and fair treatment for all creditor classes," said Mitchell B. Arden, Orleans' chief restructuring officer as well as senior managing director and shareholder of Phoenix Management, in a news release.

First in line to be repaid in full are those administrating the bankruptcy, those who provided the financing for the company to keep its doors open, tax assessors, and "certain secured and operational lien claims."

Those who owned secured claims both before and after the bankruptcy filing will be paid in common stock in the reorganized company, new notes, and cash, depending on where they fall in priority.

Other creditors will get a share of what's left. If they want their cash now, they can elect to receive 5% of what they are due up front up to a $25,000 limit.

NVR, which had agreed to be a "stalking horse" bidder on the entire asset, including 4,300 lots in 11 divisions in eight states at a starting bid of $170 million, was unhappy when the auction was cancelled and has sued the company asking for damages. NVR's adversary claim in bankruptcy court is still pending.

If it had successfully won the auction, NVR would have significantly boosted its land holdings in markets complementary to its own.

Orleans operates in southeastern Pennsylvania; central and southern New Jersey; Orange County, N.Y.; Charlotte, Raleigh, and Greensboro, N.C. (with some South Carolina communities); Richmond and Tidewater, Va.; Chicago; and Orlando, Fla.

Meanwhile, Orleans has continued to build homes. In the reorganization plan announcement, Orleans, which hasn't made regular earnings announcements for a year, said it had lost $57.9 million for its 2010 fiscal year compared with $129.5 million in fiscal 2009. Its 2010 revenue was $218.2 million versus $330 million in 2009.