Florida builder TOUSA announced March 23 that it is ceasing sales of new homes, winding down its operations, and working to sell off its assets "due to the severe economic environment." The wind-down represents the largest single business failure in the history of the home-building business, but is only one of many in the housing industry during this downturn.
The builder, which has been under Chapter 11 bankruptcy protection since Jan 29, 2008, announced that it is now focusing on selling off what's left of its spec homes and "monetizing its assets over time." According to a company spokesperson, TOUSA is not seeking to switch its bankruptcy filing from Chapter 11 to Chapter 7.
"We are proud that the TOUSA brands have been providing the dream of homeownership across the country for over 40 years," John Boken, CEO and chief restructuring officer for the company, said in the news release. "While the market environment has impaired our ability to maintain our historical operating platform, we will continue to build out homes and sell our existing inventory during this process. We expect that this process will continue for a few years in order to maximize value for our creditors as well as to ensure that we continue to deliver quality homes to our existing customers."
The Hollywood, Fla.-based company is negotiating to sell its Texas home building operations in Houston, San Antonio, and Austin, which build under the Newmark and Trophy brands. It is also negotiating with several parties to sell its financial services businesses including Universal Land Title, Preferred Home Mortgage Co., and Alliance Insurance Information Services, the release said.
The move will result in more layoffs in both its corporate and division offices. Severance packages will be provided.
"The dedication, commitment, and tireless work of our associates over the last 18 months resulted in the company outperforming market expectations. And, while we would have preferred a different outcome, their efforts were impactful and very much appreciated," said Boken. "We can all be proud of what we have been able to accomplish on behalf of our creditors and our customers in this unprecedented market environment."
The decision to wind down the company came shortly after discussions with Standard Pacific Homes to buy the company's assets ended. "I think what they decided in the end--the company/senior debtors--is they think they can do better by selling the assets off in liquidation," Standard Pacific CEO Ken Campbell said during a February earnings call.
At the time TOUSA filed for bankruptcy in January 2008, it listed its assets at $2.3 billion and debt at $1.8 billion. It's likely the past year has seriously eroded the value of the company’s assets.
TOUSA spokeswoman Jennifer Mercer said the company will file an amended reorganization plan for the bankruptcy court soon. In October, TOUSA proposed a plan for reorganization that would hand over stock and control of the reorganized company to the holders of $300 million in second lien debt, effectively wiping it out. That plan met with objections.