In early April, a hearing scheduled in North Carolina’s federal bankruptcy court could move Anderson Homes one step closer to emerging from its year-long Chapter 11 court protection.
If the court approves its reorganiza-tion plan, Raleigh-based Anderson should emerge from bankruptcy soon after in pretty good shape, says president and owner Dave Servoss. The company would have about $9 million in debt (down from $14 million when it filed), 90 finished lots (from 240 at peak), and 20 homes in various stages of completion. Two of its six bank lenders have agreed to continue financing projects for Anderson, which, despite all the financial turmoil, is expected to close about 75 homes this year.
“It’s not been fun, but it hasn’t been devastating,” says Servoss about his rocky road out of bankruptcy. “Everything is more difficult than you thought it would be and has an attached explanation.”
If Anderson rises from Chapter 11, it will be among the chosen few. It once seemed as if no builder that entered bankruptcy would ever come out alive. The spectacular early failures of major builders and developers such as Levitt & Son, TOUSA, Neumann Homes, Landsource, and Reynen & Bardis only confirmed doomsayers’ predictions that liquidation would be the fate of most of these struggling companies.
But at least a dozen bankrupt builders have either escaped Chapter 11 as operating entities or are close to doing so. This group includes North Salt Lake City–based Woodside Homes, whose reorganization plan was approved last October and went into effect on Dec. 31. One of the largest builders to get a second life, Woodside is now owned by 80 shareholders (many of which were creditors). Its $315 million in debt is much less than the $1.5 billion when it filed. It also has between $150 million and $200 million in cash, and 10,000 lots it can monetize. Woodside exited Chapter 11 with 83 open projects, 14 sales offices, and 250 specs. As it negotiated with creditors in court, Woodside managed to close 1,788 homes last year and generate $459 million in revenue (some of it from a Colorado venture that is no longer part of the company), likely retaining its status as one of the 10 largest private home builders in America. A vast majority of bankruptcy survivors continue to build and sell homes while under court protection, with banks grudgingly financing many of those activities. Even so, builders typically portray lenders as obstructionists during Chapter 11 (see “Left Stranded,” page 70). “The whole problem with this loop has been the banks,” says Tom Hoyt, who, with his wife Carolyn, co-owns Colorado-based McStain Neighborhoods.