Kimball Hill Inc. announced Tuesday, Dec. 2 that the company will no longer seek to restructure under Chapter 11, for which it filed in April, but that it will now liquidate all assets.
In a statement, CEO Ken Love said: "We deeply regret the necessity of today's decision, but given the current housing and financial market conditions we are simply unable to conduct normal operations while the company continues its sale efforts. We believe it is appropriate to begin the wind-down process now to ensure the smoothest transition possible for our employees, our home buyers, the communities we serve, as well as our creditors."
Kimball Hill filed for bankruptcy on April 23 in the Northern District of Illinois Bankruptcy Court. At the time the company claimed $795,473,000 in total assets and $631,867,000 in total debts, with more than 10,000 creditors listed.
"The restructuring plan they had might have been sound [when they filed for Chapter 11 bankruptcy court protection] but the market has significantly changed since then," said Lance Ramella, principal at RW Real Estate Advisors in Oakbrook Terrace, Ill.
Ramella added that he is sure Love did everything he could have to keep the company as viable as possible, today's market compared to April's, "It is a different world."
The land deals that Kimball Hill was involved in are most likely the cause of the hard times the company came upon, especially since the deals were made close to the falling market, according to Ramella.
"The land holdings weighed down too much to generate any amount of revenue. It was too much for them," he said.
One deal, a 2,470-unit development on 1,300 acres called Settlers Ridge in Sugar Grove, Ill., is a prime example. The land was purchased near the precipice of the market collapse in 2005. The company also held land in further out suburbs, adding to the difficulty.
Calls to Kimball Hill and chief restructuring officer Andrew Hede, with Alvarez & Marsal, were not returned.
Love went on to state that, over the next six months, the company will finish homes that are currently under construction, which is possible since the company still has access to $35 million from its debtor-in-possession financing facility. That combined with money coming in from home sales will enable Kimball Hill to fully fund all contractors, trade partners, and employee payrolls.
"We have maintained very strong relationships with our trade partners and suppliers during the bankruptcy and have appreciated their ongoing support, which we anticipate will continue as we complete homes currently under construction," Love said. "The quick resolution of our trade partners' pre-petition claims following the bankruptcy filing was a significant achievement, and we will continue to pay our suppliers as work is completed throughout the process."
With bankruptcy filings not uncommon among home builders today, Ramella added that Love did a good thing and "threw in the towel, calling it quits in time to satisfy the company obligations."