Village Homes: Liquidation Candidate
There has been escalating conflict between Village Homes of Colorado (which filed for Chapter 11 in Nov’08) and its lenders. See our earlier post – Fight between Lenders and Home Builder Over Short Sales.
The builder has been in a precarious position, given that it is unable to reach an agreement on post-petition financing from existing lenders (third party financing is possible but immensely difficult in the current market environment for home builders).
This situation is not unexpected – based on book values alone, the deficiency for creditors might be higher than $35 million. This deficiency number is likely to be much higher in terms of market value, so we project a recovery for unsecured creditors to be extremely low (or zero). Our Crash Predictor says there is a very high likelihood that this home builder is going into liquidation.
Recent developments in Jan’09 include filings by Guaranty Bank and Rescap for relief to lift the automatic stay in order to pursue foreclosure. This is notification for potential Pre-Preforeclosure properties. For those of you looking to buy, keep this in view.
Do you think Guaranty Bank’s actions are not typical since they are in the midst of a transition? I remember reading SEC filings from about a month ago that the bank has eliminated its general counsel position (Zsolt Bessko) and it is outsourcing its legal functions.