April 17, 2007
I loved the website fuc&edcompany during the dot-com collapse. Time for someone to start one for the REIC collapse, even though mortgageimplode is doing a great job of it on the lender side.
The collapse of the subprime mortgage market may push some big U.S. homebuilders toward Chapter 11 beginning next year, according to bankruptcy advisers and lawyers who specialize in the real estate industry.
The weakest publicly held builders are staying out of bankruptcy by relying on the profits they made when sales boomed and on the public debt they sold in those years, said Ronald Greenspan, a lawyer and financial adviser to the creditors of four bankrupt subprime mortgage lenders. Homebuilders issued $3.6 billion in public debt in 2005 and 2006, though only $600 million of that comes due this year, Greenspan said.
``There is no sword over the industry's head yet,'' said Greenspan today at a conference of the American Bankruptcy Institute in Washington. ``That doesn't mean the industry is not wounded. Instead, the breaking point could come in 2008 or 2009.''
None of the major, publicly traded homebuilders have declared bankruptcy, though there are signs many are in financial trouble, Greenspan said, declining to name specific companies. The value of shareholder's equity for some companies equals or exceeds the value of the undeveloped land the companies have under contract, he said. As the housing downturn continues, that land will fall in value.
``You are going to see the smaller companies get bit earlier,'' Bruck said. By next year, or the year after, some of the larger companies will be forced to restructure as the housing crunch continues, he said.
``It's only a matter of time,'' Bruck said.