Fulton Homes to exit Chapter 11

After a contentious and drawn-out bankruptcy proceeding, Tempe-based Fulton Homes has reached a settlement with its lenders that will allow it to emerge, after 28 months, from Chapter 11 protection.

A group of lenders led by Bank of America has agreed to withdraw a competing reorganization plan in exchange for company founder Ira Fulton forgiving $25 million in personal loans he made to the company.

The settlement Tuesday in Phoenix paved the way for the approval of Fulton's reorganization plan by U.S. Bankruptcy Judge George Nielsen and the company's return to normal operations.

Under terms of the reorganization, the lender group will receive an up-front cash payment of $57.5 million and will receive the balance of the total $163 million owed in installments over the next four years. An additional $2.2 million in miscellaneous debts will be paid when the plan becomes effective.

Fulton Chief Financial Officer Steve Walters said the company will emerge from Chapter 11 "completely solvent" and able to meet its operating expenses without relying on outside financing.

Fulton Homes will continue under principal ownership of the Fulton family, and its current management will remain in place.

The Phoenix-area homebuilder sought Chapter 11 protection early in 2009 after the recession put an end to the Arizona housing boom and sent real-estate values plummeting.

At the time, Fulton, with 21 active subdivisions in metro Phoenix, was one of Arizona's largest homebuilders.

Friction quickly surfaced between the company and its lenders, which at the time included BofA, JPMorgan Chase Bank, Compass Bank, Guaranty Bank and Wachovia Bank.

The banks initially wanted the 37-year-old company liquidated and sparred over its continued philanthropic endeavors.

Founder Ira Fulton and his wife, Mary Lou, are two of the state's most generous benefactors, pledging almost $160 million to Arizona State University alone.

The banks also objected to Fulton's insistence on being repaid approximately $25 million he claimed to have advanced the company in hard times. Under the reorganization, the debt will be converted into equity in the company.

The banks eventually filed a Chapter 11 reorganization plan and sought to wrestle control of the company from the Fulton family.

In April, the company and its lenders were ordered into mediation, which ultimately led to the settlement.

Walters said the company now is building in nine subdivisions in the southeast Valley and plans to open five more within the next nine months. It expects to sell about 300 homes this year and fully is on the road to recovery, Walters added.

Douglas Fulton, Ira's son and CEO, added that the company intends to continue to support philanthropic causes when it emerges from Chapter 11.

"We will continue our public-service campaigns," he said, "making the Valley a safer place for families and helping better the area's education system."

by Max Jarman The Arizona Republic-Jun. 29, 2011 12:00 AM




Fulton Homes to exit Chapter 11