Kimball Hill hires Alvarez & Marsal, considers Chapter 11 filing, may miss June coupon

New York, Feb. 12 - Kimball Hill, Inc. said it has hired Alvarez & Marsal North America, LLC, is considering alternatives including "a complete restructuring" under Chapter 11 of the Bankruptcy Code and warned it may not be able to make the June interest payment on its bonds.

The Rolling Meadows, Ill.-based homebuilder said its current levels of cash flow are not sufficient to allow it to pay principal and interest on its debt, including its senior credit facility and senior subordinated notes, support its operations and meet its other obligations. As a result, it has to make additional borrowings on its senior credit facility to meet these needs, according to a 10-Q filing with the Securities and Exchange Commission.

Furthermore, the company said there is a "substantial likelihood" it will not be able to make the coupon payment due in June on the notes.

In addition to filing for bankruptcy, Kimball Hill is also considering whether to name a chief restructuring officer.

The company said on Jan. 28 it had reached a limited duration waiver agreement with its credit facility lender group that extends it until March 14.

The waiver allows the company continued access to the credit facility and gives it additional time to reach a final agreement.

During this time, the company said, it plans on working towards getting a new extended term financing agreement with its bank group that reflects current conditions.

Kimball Hill has been in discussions with its bank group since last year because it was not in compliance with several of its financing covenants.

On Thursday, the company said it is no longer in compliance with the covenants as a result of additional impairment charges that were recorded as part of preparing its financials for the quarter to Dec. 31, 2007.

Discussions will continue over further waivers or amendments, it added.

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