Sunday, September 5, 2010

Judge: No liquidation for Fulton

Judge George B. Nielsen Jr. took a moment during a U.S. Bankruptcy Court hearing Thursday in Phoenix to reassure debtor Fulton Homes Corp. and the public that he does not intend to liquidate the Tempe-based homebuilder.

Whether or not liquidation is a real possibility for Fulton Homes, its bankruptcy attorney, Craig Hansen, said public perception that the company could be dismantled has hung over its recovery effort like a dark cloud since it sought the court's protection from creditors in January 2009.

Nielsen said liquidation is an unlikely outcome to Fulton Homes' long and bumpy Chapter 11 reorganization proceedings, especially if the company's recent accounts of increased sales activity are accurate.

"It would require a major failing in this case to convince me to liquidate," Nielsen said.

Hansen said the company is eager to complete its recovery and resume a more normal existence.

The attorney urged the court to push ahead with consideration of Fulton's latest reorganization plan, the fourth it has submitted in 20 months. Hansen estimated court approval of the plan could help see the company emerge from bankruptcy by early October.

The company's creditors, which include Bank of America, JPMorgan Chase Bank, Compass Bank and Wachovia Bank, are seeking millions of dollars for unpaid debts, much of it stemming from a $250 million unsecured line of credit extended to Fulton Homes during the housing boom earlier in the decade.

Lead creditor BofA cut off the credit line in late 2008. The Charlotte, N.C.-based bank contends that Fulton Homes owes it more than $163 million.

Attorney Tim Gaffney said his client, BofA, and the other creditors need more time to review the plan, which Fulton submitted Aug. 20.

"A lot of us have questions that we need to have answered," Gaffney said, adding that 28 days is a typical review period for reorganization plans.

Nielsen agreed to give the creditors an additional week and set the next hearing date for Sept. 2.

Fulton Homes has been trying for months to fend off creditors' efforts to force a liquidation of the company.

The Tempe-based builder said in June that a successful effort to reposition the company from a luxury-home builder to a provider of lower-cost homes for first-time buyers has led to a dramatic increase in home sales and net income.

The company's attorneys also have filed court documents stating that liquidation is unnecessary because the company's turnaround would allow it to repay creditors in full.

The creditors' attorneys have complained repeatedly about Fulton Homes' refusal to provide a plan for possible liquidation or to acknowledge the possibility that liquidation provides the most beneficial outcome for creditors.

They have argued in court documents that Fulton Homes' plan to repay creditors by 2015 is based on a best-case scenario and that it would not include reimbursement for some costs such as attorneys fees.

Fulton Homes was founded in 1974 by Ira Fulton, a prominent community figure and one of the state's best-known philanthropists.

by J. Craig Anderson The Arizona Republic Aug. 27, 2010 12:00 AM

Judge: No liquidation for Fulton

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