Rhodes Homes Requires More Time to Restructure
Rhodes Homes, one of the leading builders in Nevada which went into bankruptcy earlier in March this year, has requested the court to extend its exclusivity period on June 19, 2009. In Chapter 11 bankruptcies, companies are given an exclusivity period where they have the exclusive right to file and solicit votes for a reorganization plan.
This is usually not a good sign that the company will be able to restructure successfully and emerge from bankruptcy. It may indicate, to some extent, that the company has not been able to negotiate with the secured lenders on the restructuring plan, in which case a fire sale and liquidation is likely on the way for investors and buyers. See our sister site for a Report on the List of Real Estate Properties available from Rhodes Homes and the valuation provided by Rhodes Homes itself.
However, in the case of Rhodes Homes, we can identify some mitigating factors as to why they may need more time. The bankruptcy proceedings involve 32 entities with hundreds of millions in outstanding debt and approximately 11,000 potential creditors, including 2 levels of senior secured debt. This is indeed a complex case. On the hand, in the current climate, we should be applauding the fact that the builder has managed to negotiate with its lenders for continued use of cash for operations so far. For those of you interested to know whether and how the builder is continuing with partially developed lots, see the Cash Flow Budget provided here.
