From Portland Business Journal
An Oregon bankruptcy judge has approved a reorganization plan for Legend Homes, one of four Portland-area homebuilders that filed for bankruptcy after the residential home meltdown.
The judge approved the plan Wednesday. Legend Homes will formally emerge from Chapter 11 on June 1. Marnella Homes and Renaissance Custom Homes have also completed their reorganization process. Vancouver-based Pacific Lifestyle Homes is still working through bankruptcy.
Under the court-approved plan, Legend’s unsecured creditors will receive between 45 percent and 55 percent of the approximately $28 million they’re owed.
Jim Chapman, president, said contractors are owed about $2 million. That group will receive 50 percent on June 1 to satisfy the debt and no other payments.
The remaining unsecured creditors, collectively owed $26 million, will receive 19 percent of their money on June 21 and over time will receive at least 50 percent of their money as Legend regains its footing.
Chapman said he’s hopeful the company will repay more than 50 percent.
Funds for the June 1 payments will come from company cash, including $12.8 million in tax refunds based on losses in recent years.
Chapman said reorganizing rather than liquidating the company is better for creditors, who would have had to settle for just 20 percent of what they were owed had the company’s assets been broken up.
Under the plan, founder David Oringdulph and his daughter, Kara, surrender ownership and new shares will be issued to Chapman and the executive team, which includes Chief Financial Officer Diana Jarvis and director of production Mike Goodrich. Oringdulph will continue to work for the company he founded in 1965 as a special projects manager.
Legend’s parent company, Matrix Development, filed to reorganize its debt under Chapter 11 of the U.S. Bankruptcy Code on June 10, 2008, one month after a court judgment led to a cash flow crisis.
The surviving company will be known as Legend Homes.
In bankruptcy, the firm began to sell homes and address debts, including loans by seven banks, unpaid taxes and 388 liens totaling more than $2 million. It surrendered unworkable projects in Tigard, Wilsonville, Albany, Hillsboro, Happy Valley, Tualatin and Corvallis to lenders.
It will continue to build homes on nearly 500 lots in five subdivisions it still controls. Banks have agreed to issue construction loans for all five: Wachovia Bank for Villebois in Wilsonville, KeyBank for Edgewater in King City, JP Morgan Chase for Willamette Landing in Corvallis, Columbia State Bank for Walnut Creek in the Tigard area and Bank of America for Orenco Station at Hillsboro.
Legend creditors rejected two earlier reorganization plans. The one that finally won approval was filed March 29.
“This plan gives us the ability to build the company back into a long-term entity,” Chapman said.
