Fulton Homes selling homes in the ordinary course of business
One of the first motions filed by Fulton Homes in its bankruptcy proceedings is the motion to sell homes in the ordinary course of business. The banks, unsecured creditors in the amount of approximately $164 million, promptly filed an objection.
The filing for this began in this manner:
Yet another home builder finds itself in a situation where it has defaulted on its loan agreement with its lender(s), and the home builder is objectively unable to service its debt or otherwise repay it in the foreseeable future. In this case, the Banks’ overwhelming debt is indeed unsecured. The reason why the Banks are unsecured at this point, however, is that the Debtor filed its Chapter 11 petition for the sole purpose of blocking the Agent’s actions to record deeds of trust to collateralize the outstanding debt with the debtor’s inventory of raw land, finished lots, homes under construction, completed homes and spec homes.
Nonetheless, upon the hearing, the court found that it is in the best interests of all parties that Fulton Homes should be authorized to continue constructing and selling homes free and clear of liens. And if any property is subject to a lien, the lienholder is entitled to sale proceeds up to the value of the lien, and the sums will be escrowed pending a hearing regarding the lien.
Simply put, the banks are not allowed to prevent Fulton Homes from continuing operations. Neither are they getting what they asked for – the right to receive net sales proceeds. Instead, the monies will be escrowed pending disputes heard by the judge in the courtroom.
