Fulton Homes mediation ordered

Almost 28 months after Fulton Homes Corp. filed for Chapter 11 reorganization, a bankruptcy judge has ordered the Tempe-based company and its creditors to undergo mediation through the 9th U.S. Circuit Court of Appeals.

Fulton Homes and its primary creditors, a group of banks led by Bank of America, have been arguing for more than two years in U.S. Bankruptcy Court over the terms under which the builder would repay the balance of its debt of more than $160 million on an unsecured line of credit.

Fulton Homes and its creditors have not been able to resolve a disagreement on the amount of debt owed.

Fulton's debt stems from a loan issued by the lenders during the Phoenix area's housing boom for land purchases and speculative housing construction.

As with all commercial real-estate loans, there were a number of conditions that had to be met to prevent the loan from going into default, including a certain ratio between the loan balance and the value of Fulton Homes' real-estate assets.

When real estate values plummeted in 2008, it quickly put Fulton Homes into default, court records show, even though the company had not missed any of its loan payments. Fulton Homes opted to file for bankruptcy protection in January 2009.

The mediation will give the parties another chance to resolve their differences. The participants will present their recommendations to a neutral mediator, who will work with both sides to set terms for the repayment of debts, according to Phoenix attorney Don Gaffney, who represents the lender group.

According to the 9th Circuit's website, all its mediators are experienced attorneys with eight to 20 years of experience settling disputes. A mediator selected randomly by the court will review the Bankruptcy Court record of the case and then conduct phone conferences with attorneys on both sides.

As of Wednesday afternoon, no dates had been set for the conferences.

The appellate court's website explains that mediators generally set their schedules based on the size and complexity of the case involved.

A total of 843 documents were filed by attorneys and the court in the Fulton Homes bankruptcy case, according to the court record.

by J. Craig Anderson The Arizona Republic Apr. 28, 2011 12:00 AM



Fulton Homes mediation ordered