Neumann Homes asks court to approve sale agreement with pre-bankruptcy lender

By Jennifer Lanning Drey

Portland, Ore., March 10 - Neumann Homes Inc. requested court approval of an agreement under which Neumann would sell substantially all of the assets and designation rights related to its Kaco development in Joliet, Ill., to Residential Funding Co., LLC, according to a Saturday filing with the U.S. Bankruptcy Court for the Northern District of Illinois.

According to the filing, Neumann currently owes pre-bankruptcy lender Residential Funding $17 million. Residential Funding also provided Neumann with $473,582 of debtor-in-possession financing. The company's outstanding debt is secured by a pledge of Neumann Homes' 80% equity interest in Precision Framing Systems, LLC and the Sky Ranch Development.

Under the proposed agreement between Neumann and Residential Capital, Residential Capital would assume $13.6 million of the outstanding debt and provide additional cash considerations disclosed to the creditors committee.

Residential Funding has also agreed to release any interest it may have on $600,000 of the proceeds of Precision Framing Systems' sale of its Montgomery, Ill., assets.

If Neumann receives additional bids for the assets, it will consult with Residential Funding and its creditors committee to consider the competing proposals and possibly establish formal procedures to address such bids.

A hearing has been scheduled for March 19.

Neumann Homes, a Warrenville, Ill.-based homebuilder, filed for bankruptcy on Nov. 1. Its Chapter 11 case number is 07-20412.

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