Kimball Hill decides to wind down operations, files Chapter 11 plan

By Caroline Salls

Pittsburgh, Dec. 2 - Kimball Hill Homes said it has decided to begin the wind-down of its operations while it continues to attempt to sell its business or assets, according to a company news release.

The company said it made the difficult decision to begin the wind-down as a result of the severe economic downturn and escalating turmoil in the credit markets.

"We deeply regret the necessity of today's decision, but given the current housing and financial market conditions we are simply unable to conduct normal operations while the company continues its sale efforts," chief executive officer Ken Love said in the release.

"We believe it is appropriate to begin the wind-down process now to ensure the smoothest transition possible for our employees, our homebuyers, the communities we serve, as well as our creditors."

Kimball Hill said homes currently under construction will be completed and delivered over the next six months.

In addition, Kimball Hill filed its Chapter 11 plan and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the Northern District of Illinois.

According to the release, the plan is supported by the company's official committee of unsecured creditors and senior lenders.

The company said that it continues to have access to more than $35 million of its debtor-in-possession financing, which along with home sale proceeds, will provide more than ample liquidity to fund payments to contractors and trade partners and meet employee obligations throughout the sale and wind-down process.

Under the plan, Kimball Hill will create a post-consummation trust and a liquidation trust, with post-consummation trust net proceeds to be distributed to holders of senior credit agreement claims and net proceeds of the liquidation trust to be distributed to holders of senior credit agreement claims and some unsecured claims.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of DIP facility claims, administrative claims and priority tax claims will receive full payment in cash;

• Holders of senior credit agreement claims will receive a share of the interests in the post-consummation trust, a share of cash payment to be made on account of a $10 million diminution claim, a share of 64% of the proceeds of the sale of the company's unencumbered assets and 100% of the liquidation trust series A interests;

• Holders of other secured claims and secured bank claims will be paid in full either in cash or through the return of the collateral securing the claim;

• Holders of priority non-tax claims will receive cash from the collateral securing the claim;

• Holders of senior unsecured claims and general unsecured claims will receive a share of 36% of the proceeds from the sale of the company's unencumbered assets, 100% of the liquidation trust series B interests and a share of a $3.9 million committee settlement payment;

• Holders of unsecured senior subordinated note claims will receive $2.1 million of the committee settlement payment unless they vote to reject the plan, object to confirmation or appeal plan confirmation, in which case the payment will revert to holders of series B liquidation trust interests and these creditors will receive no distribution; and

• Holders of subordinated debt securities claims, interests, intercompany claims and intercompany interests will receive no distribution under the plan.

The company has asked the court to schedule the disclosure statement hearing for Jan. 12.

Kimball Hill, a Rolling Meadows, Ill.-based homebuilder, filed for bankruptcy on April 23, 2008. Its Chapter 11 case number is 08-10095.

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