Kimball Hill Homes files bankruptcy to address homebuilding industry challenges

By Caroline Salls

Pittsburgh, April 23 - Kimball Hill Homes filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Northern District of Illinois as part of its ongoing strategy to reposition the company in light of homebuilding industry challenges, according to a company news release.

The company said its financial service businesses were not included in the filing.

Kimball Hill said its asset base remains strong, but the company has been impacted by the downturn in the housing market, severe challenges in the credit and mortgage markets, diminished consumer confidence, increased foreclosures and higher cancellation rates.

"Today's decision was difficult to make, but we believe it is in the best interests of all of our stakeholders," president and chief executive officer Ken Love said in the release.

"Filing for Chapter 11 will allow us to restructure our debt and other obligations, bringing our capital structure in line with current market realities."

The company said it has already implemented a number of initiatives aimed at improving operating performance, including reducing overhead costs and a recent decision to exit the Florida market by the end of 2008.

"Our issues are financial, not operational," Love said in the release.

"The next step in our restructuring is to strengthen our capital structure and position our company to weather the current storm that has hit the housing and capital markets.

"We have had significant discussions with potential plan sponsors and our senior lenders already, and we hope to agree on a reorganization plan in the next 90 days.

"We will continue to sell, build and deliver homes without interruption."

Kimball Hill said it has more than $60 million in cash, which will give it enough liquidity to fund its daily operations, including post-bankruptcy payments to contractors and trade partners and customer and employee payments during the restructuring.

According to court documents, Kimball Hill had $795.47 million in assets and $631.87 million in debt as of Dec. 31.

The company's largest unsecured creditor is indenture trustee U.S. Bank NA, with a $203 million unsecured note claim.

Kimball Hill is a Rolling Meadows, Ill.-based homebuilder. Its Chapter 11 case number is 08-10095.

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