Chicago-area builder The Kirk Corp. has filed for Chapter 11 bankruptcy court protection in the Northern District of Illinois, saying it plans to re-emerge as quickly as it can strike a reorganization agreement with its lenders.
"We are confident that the reorganization process gives us more opportunity to work with our lenders--JPMorgan Chase, Bank of America, and others--and to secure additional financing, which will allow us to continue building high-quality homes for Chicago area homeowners for many years to come," John Carroll, the company's president and CEO, said. "We enter this process with strong fundamentals, robust sales at many of our communities, and the continued commitment of our employee owners to work through this temporary situation and emerge as an even stronger organization."
On Thursday, May 14, the bankruptcy court judge agreed to allow the Steamwood, Ill.-based company to continue to use its bank accounts and cash management system and waived investment and deposit requirements. It also gave the company nine more days to flesh out its bare-bones filing from May 12 with more details about its debts and creditors.
The builder merely checked the $50 million to $100 million boxes for both its assets and liabilities on the filing form. On the list of the top 30 largest unsecured claims, it listed Donald L. Kirk with subordinated debt of $5.7 million as the largest and the Donald Kirk Investment Co. second with $2.3 million. The company's employee owners, the ESOP Noteholders, were third with a trust obligation of $1.8 million.
The company's press release said the company's standing inventory is less than the industry average, and that under the bankruptcy court's protection, it will continue to operate in a business-as-usual mode. That includes selling and marketing its homes, providing warranty service, and selling homes free of liens. It plans to complete homes already under construction and begin new construction on recently sold homes as well.
In an attempt to gather some cash, it said it is looking to sell its non-residential properties in Northern Illinois.
CEO Carroll told the Chicago Tribune that a group of lenders forced his hand by only advancing funds for payroll and other expenses, but not for home building activities over the past few months.
"We're not going to be making profits, but our company has had a very strong balance sheet and other assets, and we're confident that with a little bit of a breather, we'll be able to go forward," Carroll told the Tribune on Wednesday. "There's a resistance on the part of these particular lenders to be in the home building lending business."
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