The hope that Standard Pacific Homes would buy part or all of TOUSA and pluck it out of its Chapter 11 bankruptcy reorganization has dimmed, and now TOUSA is back to square one, looking to develop a reorganization plan to which its many contentious creditors will agree.

Standard Pacific told TOUSA on Jan. 16 that, after conducting due diligence on TOUSA's assets, it "would insist on a substantial purchase price reduction" and that it still needed several more weeks to finish its research on the company's holdings, according to a bankruptcy court filing on Jan. 27. The document did not name Standard Pacific directly, instead calling it a "Plan Investor." Standard Pacific issued a press release Dec. 19 announcing that it was considering a plan to purchase assets from TOUSA, couching its statement in terms of "a possible transaction" and not specifying whether its interest was in certain assets or in the entire company.

With that plan stalled, it's back to the drawing board for TOUSA.

"The debtors and their various creditor constituencies are once again considering all possible plan alternatives in an effort to formulate and negotiate a chapter 11 plan that would maximize recoveries for all parties in interest to the extent possible," TOUSA said in its request to extend the deadline to submit an exclusive plan to reorganize the company. It's asking the court to give it until June 22 to file a new plan and until Aug. 21 obtain buy-in from its creditors.

Florida-based TOUSA passed its first year anniversary in bankruptcy on Jan. 29. Coming up with a plan that a majority of the creditors will buy into has proven difficult. There are 39 TOUSA entities with assets and operations in 10 states involved. Its creditors are even more numerous. There are more than 50,000 creditors who hold more than $2 billion in funded debt, plus substantial unsecured creditors' claims--and they've formed several constituencies.

Plus there's a lawsuit lurking in the background, which accuses TOUSA of fraudulently conveying company assets out of the company prior to the bankruptcy filing.

Last October, TOUSA filed its first proposed reorganization plan.

"The debtors believed that, while the plan did not give any constituency what it would have wanted in an ideal world, it represented a compromise that was the best alternative available to maximize the value of the company for all constituents," TOUSA wrote in the court filing last week.

It proved unpopular immediately, with both the first-lien lenders and the creditors' committee filing objections. After the possibility of a purchase by Standard Pacific hit the company's radar in December, TOUSA stopped working on the reorganization plan. Now, management is back at it.

Standard Pacific representatives did not immediately return Big Builder's call Monday, Feb. 2, asking for more information on the negotiations. TOUSA spokesperson Jennifer Mercer said that TOUSA had no additional comment to make.

Teresa Burney is a senior editor at Big Builder magazine.

Learn more about markets featured in this article: Orlando, FL.