When John Laing Homes filed Chapter 11 bankruptcy last week, it confirmed what many in the industry had already heard about the Irvine, Calif.-based builder: that it was in financial trouble. In fact, Laing, known officially as WL Homes, has between 25,000 and 50,000 creditors, to whom it owes between $500 million and $1 billion, according to court documents.
Those documents also reveal just how quickly things began to deteriorate in late 2008 and early 2009, as its corporate parent, Emaar Properties, decided to stop funding the builder on an unsecured basis, and banks froze the builder’s accounts.
As builders large and small face this housing recession—and keep their fingers crossed they never encounter another one quite this bad—it’s worth reviewing the events that led to Laing’s filing. After all, as the saying goes, those who forget history are doomed to repeat it. --Alison Rice
John Laing Homes: Key Events, 2006-2009
June 2006: Emaar Properties of Dubai purchases John Laing Homes (corporate name: WL Homes) for $1.05 billion.
2006: Housing downturn begins.
2007: Emaar Design Studio established as a division of John Laing Homes to provide “to manage the teams of consultants responsible for the master-planning, architecture, interior design, landscape design, and branding for all Emaar projects outside North America.”
2007: Laing sells 1,371 homes for $948 million in revenue.
2008: Laing cancels 401(k) match for employees.
Nov. 30, 2008: With the housing downturn deepening, Laing sells just 560 homes for $287 million in revenue between Jan. 1, 2008, and Nov. 30, 2008.
December 2008: Emaar, which has invested nearly $614 million in Laing since its 2006 purchase, stops funding Laing on an unsecured basis.
Dec. 17, 2008: Laing hires restructuring experts Development Specialists, Inc.
January 2009: Emaar advances $20 million to Laing “in connection with the requirements of certain letters of credit issued by Citibank.”
Jan. 5, 2009: Laing stops selling and building new homes this week, cancelling existing contracts for everything except for its custom home division and returning $1.6 million in buyer deposits.
Jan. 26, 2009: Bank of America notifies Laing that its bank accounts, including its main operating accounts, have been frozen because of Laing’s debts with BofA.
Jan. 28, 2009: Wachovia freezes Laing bank accounts held by Wachovia because of Laing’s debts to the bank.
Feb. 5, 2009: Laing lays off employees, leaving a workforce of just 90 people. Since 2006, Laing has done multiple layoffs, decreasing its 1,100 person workforce by 90 percent.
Feb. 12, 2009: Laing receives a five-day notice to “pay rent or quit” its Irvine, Calif., corporate headquarters.
Feb. 18, 2009: Laing appoints Bradley D. Sharp as its chief restructuring officer.
Feb. 19, 2009: Laing files for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Delaware.
March 31, 2009: Emaar Properties’ planned shutdown of Emaar Design Studio. The studio’s 13 employees will lose their jobs when the division closes.
Sources: Declaration of Bradley D. Sharp, chief restructuring officer, in support of first day motions, U.S. Bankruptcy Court, Delaware; Reuters
Learn more about markets featured in this article: Los Angeles, CA.
