Florida-based luxury home builder WCI Communities Inc. and 130 subsidiaries have filed for Chapter 11 bankruptcy protection from creditors, the company said Monday, acknowledging that up to $1.8 billion in debt may soon be in default.
The company’s Watermark real estate brokerage, which does business as Prudential Florida WCI Realty, was excluded from the filing, as was its WCI Mortgage business and certain other joint ventures in which WCI is a partner, the company said.
Prudential Florida WCI Realty will continue to provide new home and resale brokerage services, as well as foreclosure and rental management services. The parent company said Realtors, brokers and customers will see no interruption in these services, and all commissions and other obligations will be honored.
WCI Mortgage, an affiliate of Well Fargo Home Mortgage, will continue to offer mortgage packages and honor existing obligations.
WCI had to file for bankruptcy protection because of a "failed effort to obtain financing," and the "recognition that the company’s entire $1.8 billion of debt may soon be in default," WCI chairman Carl Icahn said in a press release. "This was confirmed when certain holders of the company’s $125 million convertible notes informed the company that they rejected its exchange offer and instead insisted on being paid in cash in full on Aug. 5, 2008."
Icahn was elected chairman of the company’s board after WCI rejected his offer to buy the company for $22 per share in March 2007, Reuters reported. Icahn bought a 15 percent stake in WCI in early 2007, Reuters said.
WCI also announced the departure of Chief Executive Officer Jerry Starkey, and the appointment of Chief Operating Officer David Fry as interim president and chief executive officer.
Fry said that filing for Chapter 11 bankruptcy would allow the company to "restructure our debt and bring our capital structure in line with today’s marketplace realities."
Fry promised that day-to-day operations would continue as usual and that Chapter 11 bankruptcy protection would allow the company to "restructure our debt and bring our capital structure in line with today’s marketplace realities."
"We will continue to sell, build and deliver homes without interruption," Fry said. "Construction and sales activities will continue; employees will come to work and be paid."
WCI, which does most of its business in Florida, New York, New Jersey, Connecticut, Maryland and Virginia, reported a second-quarter net loss of $100.2 million on July 29, and $184.3 million in losses for the first half of the year.
The company said it currently owns and controls developable land on which it plans to build more than 15,000 traditional and tower homes at prices ranging from the high $100,000s to more than $10 million.
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