On March 1, 2010, Orleans Homebuilders filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to Orleans’ Declaration in Support of First-Day Pleadings, the company filed for bankruptcy hoping to get the “breathing space” necessary to reorganize its business.
The circumstances leading up to Orleans filing for bankruptcy illustrate the recession’s effect on home builders throughout the United States. In 2006, Orleans’ revenue had reached $987 million, however, by 2009 revenues were down to $335 million. In response to the drop in new home sales, Orleans cut its spec home production by 53% and stopped construction all together in the Florida and Arizona markets. Although the company was able to remain cash flow positive, Orleans ultimately had to cut its staff by 67%. See Orleans’ Declaration at p. 7.
Market conditions have not improved for home builders. Low sales, compounded by volatility in the credit markets, left Orleans with little option other than to file for bankruptcy. In order to continue its operations while in bankruptcy, Orleans filed a Motion Authorizing the Payment of Certain Critical Vendors on the same day that it filed for bankruptcy. As stated in the Motion, Orleans owes various vendors and third parties for pre-petition goods and services. Orleans is concerned that if the pre-pretition claims of its “critical vendors” are not paid immediately, these vendors will no longer provide services and the company will not be able to continue operations. See Motion at p. 9.
According to Orleans’ bankruptcy petition, Jeffrey P. Orleans is the company’s largest shareholder, owning over 11 million shares, or 59%, of class A stock. Orleans’ largest trade creditors include:
- 84 Lumber Company … $1.4 million
- Robert K. Foster, Inc. … $1.1 million
- Sunrise Concrete Company … $677,234
- Concrete Solutions of Raleigh, Inc. … $658,567
- Archer Exteriors, Inc. … $616,798
This bankruptcy proceeding is before the Honorable Peter J. Walsh, former Chief Judge of the United States Bankruptcy Court for the District of Delaware.