Case Studies
J.S. Held Acquires Technorm, Québec’s Leading Forensic, Building Safety & Compliance Experts
Read MoreIndustry: Construction
Primary Services: General Building Construction
The Company was a $300 million marketer, developer, and builder of high-quality, single-family homes, townhomes, and condominiums. Their homes were meant to serve various types of homebuyers, including move-up, luxury, empty-nester, active adult, first-time move-up, and first-time homebuyers across six states (Illinois, New Jersey, New York, North Carolina, Pennsylvania, and Virginia).
The Company, along with the entire US homebuilding industry, experienced a significant and sustained downturn characterized by decreased demand for new homes, an oversupply of both new and resale home inventories (including homes under foreclosure), a decline in average selling prices, and aggressive competition amongst homebuilders. This declining real estate market negatively impacted homebuilders nationwide.
The decrease in demand for new homes was exacerbated by the global credit crisis, which made traditional mortgages more difficult to obtain, and their terms and pricing more onerous, resulting in a challenging lending environment for an increasing number of prospective homebuyers. As a result of this and other external factors, the Company’s consolidated revenue dropped from $987 million to $330 million just four years later, and the Company’s pre-tax income declined during the same period from $65 million to negative $160 million.
At the time of the Company’s bankruptcy filing, the Company faced numerous operational and financial challenges, any one of which had the potential to be the event that forced the Company to cease operations. The Company’s 17-member, syndicated lending group, made the collective decision to not extend the previously extended maturity dates of the Company’s $350 million credit facilities and issued a default and reservation of rights letter.
In the wake of the Company’s filing, it lost the support of its critical title insurer and home warranty providers. Numerous material vendors and subcontractors had been stretched to the point that the Company had effectively ceased homebuilding operations during the 4-6 week period prior to the bankruptcy filing. Management was unable to create a cohesive strategy to enable the Company to emerge from its dire condition. Finally, the Company’s 300+ employees lost operational focus as the Company’s long-term health was in serious doubt.
Our experts, in concert with multiple other professionals, immediately developed and implemented a comprehensive turnaround plan incorporating integrated legal, liquidity, operational, and organizational strategies. The turnaround team coordinated the negotiation and approval of a $120 million DIP facility and developed a procedure that allowed the Company to sell homes free and clear of liens while preserving the rights of holders of claims against the properties.
Nine months after the Company’s filing for Chapter 11 protection, the U.S. Bankruptcy Court for the District of Delaware confirmed the Company’s Modified Second Amended Joint Plan of Reorganization. Subsequently, the Company completed its financial reorganization and emerged from Chapter 11 as a newly reorganized company with $160 million in exit financing, including a $30 million credit facility. The new company was privately owned and led by a respected industry veteran and a new board of directors.
The post-bankruptcy Company is marked by a streamlined management team, strong operations, and less than half the debt the Company had on its balance sheet when it filed for bankruptcy protection. At a time when very few homebuilders successful emerge from bankruptcy protection, a company’s legacy that extends back to 1918, as well more than 200 jobs were saved via this successful turnaround. In addition, in-process homes for more than 500 families were able to be completed that otherwise would have been left unfinished if the Company had ceased operations.
Going forward, with its reorganized operations and healthy balance sheet, the Company is poised to be an industry leader in the development and building of high-quality, single-family homes and townhouses.
Brian F. Gleason, CTP
Senior Managing Director
Strategic Advisory Practice
+1 610 659 8118
[email protected]
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