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Sunday, June 6, 2010

Fulton Homes opposes creditors' plan

by J. Craig Anderson The Arizona Republic Jun. 3, 2010 12:00 AM

Bankruptcy has been good to Fulton Homes, according to documents the company filed in U.S. Bankruptcy Court last week stating that it intends to repay creditors in full, with interest, over the next five years.

The Tempe-based homebuilder is trying to fend off a competing reorganization plan proposed by its creditors, led by Bank of America, that would involve liquidating the company and selling off its remaining assets. The bank claims Fulton Homes owes it more than $163 million.

In two motions filed Friday, Fulton Homes' attorneys argue that terminating the company's operations is unnecessary and would be less beneficial to creditors and to the local economy.

"BofA can no longer claim that it will not receive as much as it would if Fulton Homes were liquidated, because BofA will be paid in full, with interest, in a timely manner," the motion states. "BofA can no longer falsely claim that Fulton Homes' actions in this case are in bad faith, or designed solely for the benefit of Fulton Homes' interest holders, because BofA and other creditors will be paid in full."

According to the homebuilder, which filed for Chapter 11 reorganization in January 2009, 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.

Fulton Homes requested an additional 90 days to finalize its reorganization plan, but more importantly, it asked the court to dismiss permanently creditors' competing liquidation plan.

Christopher Bayley, a Phoenix attorney representing BofA in the bankruptcy case, expressed skepticism about the builder's latest vow to repay creditors by Dec. 31, 2015.

Although the company's sales have improved since it filed for bankruptcy protection, Bayley said, Fulton Homes' ability to make good on a five-year repayment plan will depend largely on the economy.

"Obviously, there's a lot of uncertainty when you're talking about repaying someone over a period of years," said Bayley, of the law firm Snell & Wilmer LLP.

Phoenix homebuilding analyst Jim Belfiore, president of Belfiore Real Estate Consulting, said Fulton Homes has performed consistently among the Valley's top-three homebuilders since filing for bankruptcy. The other top builders are Blandford Homes and Meritage Homes.

Although he acknowledged there could be unforeseen challenges ahead, Belfiore said Fulton Homes has successfully lowered the cost of its products and repositioned itself as a leader in the starter-home market, where the bulk of existing buyer demand is situated.

"For Fulton, the bankruptcy has allowed them to remake themselves as a builder," he said.


Fulton Homes opposes creditors' plan

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