Private equity-backed developer Wall Homes has filed for Chapter 11 bankruptcy protection blaming a lack of credit for its own liquidity problems and that of potential customers.
Wall Homes said in bankruptcy documents falling home sales, driven by the debt squeeze, in the latter half of 2008 had “significantly” reduced its revenues. At the same time, Wall Homes’ lenders also limited the amount of debt available to the firm.
Wall Homes was founded in 2005 by Texas developer Steve Wall with a $50 million investment from Warburg Pincus’ $5.2 billion fund, Warburg Pincus Private Equity VIII.
According to the petition, Wall Homes’ lenders have refused to fund the construction of any new homes and will only “advance funds, in reduced amounts, to complete the construction of the houses already sold but not completed as of the time of the bankruptcy filings”.
Wall Homes has around $40 million in undeveloped land, 127 unsold properties and 67 homes in Texas that have been sold or are under construction. The court documents valued the properties at approximately $43 million.
Wall Homes owes $41.8 million to Warburg Pincus and $7.2 million to an investment vehicle called “Jen 1”, according to the documents. Around $62.4 million is owed to lenders including JP Morgan Chase, RBC Centura Bank, Frost National Bank, Comerica Bank and Guaranty Bank, the filings added.
Wall Homes has asked the Northern Division of Texas (Dallas) Bankruptcy Court to allow it to use home sale proceeds to complete and sell its remaining properties. “Without being authorised to use such funds [our] operations would cease,” court documents said.
Wall Homes employs 92 people, and focuses on the Dallas/Fort Worth, San Antonio, Austin and Houston areas.