Orleans Homebuilders files reorganization path cutting debt in half

By Angela McDaniels

Tacoma, Wash., Aug. 12 - Orleans Homebuilders Inc. filed its plan of reorganization and related disclosure statement with the U.S. Bankruptcy Court for the District of Delaware on Thursday, according to a company news release.

The company said the plan would reduce its debt to less than $200 million upon emergence from more than $400 million at the time of the filing.

"We have spent the past few months negotiating with those holding more than 80% of the company's secured debt to reach an agreement in principle with respect to a reasonable and fair treatment for all creditor classes. The plan filed today reflects our best efforts in that regard, and it provides a path to the future for Orleans Homebuilders that did not exist five months ago," Mitchell Arden said in the release. Arden is senior managing director and shareholder of Phoenix Management and has been acting as Orleans' chief restructuring officer.

Under the terms of the plan:

• All administrative, debtor-in-possession facility, tax, priority and some secured and operational lien claims would be paid in full and are unimpaired;

• Holders of some pre- and post-petition secured claims would receive their pro rata share of common stock in the reorganized company, new notes and cash depending on their relative priority;

• Holders of general unsecured claims, including the secured creditors' deficiency claims, would receive their pro rata share of the proceeds of sales of assets unencumbered as of the date of the bankruptcy filing. These holders may also participate on a pro rata basis in some potential recoveries from avoidance actions.

The company said the anticipated recovery for the general unsecured claims class is estimated to be minimal. Holders of general unsecured claims may elect to convert their claims to a convenience class, which provides for a 5% cash payment based on claims limited to $25,000;

• Holders of junior subordinated notes and trust preferred securities would receive recovery comparable to the class of general unsecured creditors, which recoveries, other than some potential recoveries from avoidance actions, would be turned over to certain of the company's secured creditors. All junior notes and trust preferreds would be canceled on the effective date of the plan; and

• No distributions would be made to equity holders.

Orleans Homebuilders, a Bensalem, Pa.-based developer, builder and marketer of single-family homes, townhouses and condominiums, filed for bankruptcy on March 1. The Chapter 11 case number is 10-10684.

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