Bankrupt Florida homebuilder Tousa Inc. on Thursday asked a Florida bankruptcy court to approve the disclosure statement for its liquidation plan, saying it has abandoned any hope of reorganization after enduring ongoing litigation and a difficult housing market.
The company filed a joint motion with the creditors committee in the case for the disclosure statement's approval, which would allow Tousa to start soliciting creditors' votes.
The homebuilder said that its Chapter 11 proceedings have been going forward as the housing industry, as well as the wider economy, have been facing "substantial and sustained" doldrums since the subprime mortgage crisis hit, with the downturn being especially steep in Florida.
"In the end, the prolonged and ongoing decline in the home building industry, which preceded and continued through what has become known as the 'Great Recession,' proved too difficult to overcome," the motion said. "While the debtors made great effort to weather the economic storm and stabilize their businesses ... prospects for an operation turnaround were thwarted in the face of economic conditions that continue to worsen."
Tousa also noted that it was embroiled in "intense and prolonged" litigation that eventually made it to the Eleventh Circuit over a 2005 prepetition joint venture with Transeastern Properties Inc. that went sour.
Tousa borrowed heavily to make the venture work, but it was crippled by the housing crisis, according to court records.
Transeastern sued, claiming its partner had defaulted on its obligations, and the two sides came to a $421 million settlement in 2007.
Tousa took out several loans to pay it off, using its more than 30 subsidiaries' assets as guarantees, but by January 2008, the companies had filed for Chapter 11 protection.
Six months later, the settlement became part of an adversary action from unsecured creditors who argued the $421 million was a fraudulent transfer because the bankrupt subsidiaries didn't get equitable value, and the bankruptcy court ordered Transeastern to disgorge the funds.
That ruling was overturned by the district court in Florida, but later upheld by the Eleventh Circuit in 2012.
With the litigation ongoing for four years, the company decided to start winding down its operations in 2009 and transitioned from built-to-order new sales and construction starts to closing sales of homes that were already under construction, and selling its remaining inventory and many land assets, according to the motion.
Since March 2009, the company generated $230 million and has $308 million in cash-on-hand, the motion states.
In the proposed liquidation plan, first-lien revolver claims of $16.6 million would see a 50 percent recovery from Tousa, and first-lien loan claims of $206.2 million would see a 56 percent recovery.
Second-lien term loan claims of $320.4 million would see a 4 percent recovery, and second-lien note claims of $573.5 million would see a 58 percent recovery, according to the proposed plan.
General unsecured claims, which total $106.7 million, would see a 5 percent recovery, the proposed plan states.
Tousa has asked that a hearing on the disclosure statement be scheduled for June 20.
Tousa is represented by Paul Steven Singerman of Berger Singerman LLP and Richard M. Cieri and Joshua A. Sussberg of Kirkland & Ellis LLP.
The case is In re: TOUSA Inc, et al, case number 08-10928 in the U.S. Bankruptcy Court for the Southern District of Florida.
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