Over the next two years, Raleigh, N.C.-based St. Lawrence Homes will be building out the nearly 100 lots it retains under a Chapter 11 reorganization plan that the U.S. Bankruptcy Court in the Eastern District of North Carolina confirmed on Aug. 20.

That plan, for all intents and purposes, reaches agreements with all of St. Lawrence’s secured and unsecured creditor classes, to which it owed $116 million when it filed for bankruptcy protection last February. Most of that liability was owed to eight banks. (The builder had surprisingly little debt with unsecured creditors, including its trade partners — only around $7 million.) Richard Ohman, St. Lawrence’s COO, credits his company’s attorneys at the firm Nicholls & Crampton with crafting this deal.

Three banks are taking back assets used by St. Lawrence to collateralize its debt. For example, the plan gives the builder 30 days to transfer all collateral assets to SunTrust Bank, which is owed $36.5 million. In some situations, the builder is receiving a flat fee to complete unfinished homes for the banks, the proceeds from which will accrue to the lender. So in the case of Regions Bank, to which St. Lawrence owed $26 million, the builder will sell, complete, and market 57 homes in 22 subdivisions, and the lender will pay St. Lawrence $66,899.74. Regions is also taking back 65 home sites in 11 subdivisions.

Five other banks, on the other hand, have agreed to continue providing financing to St. Lawrence to finish projects, and will split the proceeds from any sales. For instance, under these terms Capital Bank, owed $5.6 million, will pay St. Lawrence a management fee of $1,500 per house per month, not to exceed $4,500; a maintenance fee of $450 per house per month not to exceed $1,400; and a $45 per lot maintenance fee. St. Lawrence is authorized to sell retained lots for 50% of their outstanding loan balance, and the builder and bank will divide the proceeds from the sale of homes and land 50-50.

“The banks we’re still working with have a mutual agreement with us about the direction the market is taking,” said Ohman, who spoke with BUILDER on Tuesday afternoon. All told, St. Lawrence gets to keep 92 houses in various stages of completion and 98 lots in four markets.

Ohman said his company will “finish up what we’ve started” in the Cincinnati, Ohio, and Wilmington, N.C., markets, and then exit them, probably within the next 12 months. The company’s future, said Ohman, will be in the Raleigh and Charlotte, N.C., markets, where it will build out the assets it retained as part of the plan over the next 18 months to 20 months.

Ohman, with his brother Bob, founded St. Lawrence Homes in 1989, and in its heyday, the company was pumping out 500 homes a year. Its homes range from 1,700 to 2,400 square feet, and are priced from $170,000 to $500,000. Ohman now admits that his company faltered when it tried to keep pace with national builders, particularly in its willingness to pay exorbitantly for land. “We all decided to get greedy,” he said.

He’s buoyed by the fact that buyers are starting to return to the market again. “Every day, for the past four or five months, we’re seeing more activity.” And while he has little good to say about big builders and what their expansion excesses wrought — “they buried all of us,” he stated — Ohman’s bankruptcy experience hasn’t soured him on the competitive hunt. “The market still dictates how big you can get, and everyone still wants to buy a home.”

 John Caulfield is senior editor for BUILDER magazine.

Learn more about markets featured in this article: Raleigh, NC, Charlotte, NC.