Kimball Hill - Bankrupt Homebuilder Update - Chapter 11 Homebuilders

Bankrupt homebuilder Kimball Hill Inc., is poised to decide by late November whether it will accept an equity buyout or provide a recovery plan to pay off creditors, just as the global financial crisis grips the credit markets.

About five companies, including equity investors and other home builders, have made overtures to buy all or part of the Rolling Meadows-based company, Chief Executive Officer Kenneth Love said Wednesday during an interview. He declined to name the suitors.

"Our ultimate goal is to exit Chapter 11," said Love. "But at the same time, we recognize that we have responsibilities. ... We have not rejected any possible scenarios."

The homebuilder filed for Chapter 11 bankruptcy protection in April due to lower demand for homes and during one of the country's worst housing markets in decades. Kimball Hill sold 1,800 homes from October 2007 through Sept. 30, compared to 3,200 for the same period the year before. It listed assets of $795.5 million and debt of $631.9 million as of last Dec. 31.

This has been one of the worst housing markets in decades, but don't count builders out just yet, said Alan Lev, president of the Home Builders Association of Greater Chicago, based in Addison.

"Sales have been slower than a few years ago, but we're still selling product, just less of it," said Lev. "We're all tied together to the financial crisis, your 401(k), the economy, the credit companies, the real estate and home building markets."

That slump has led Kimball Hill to reduce its workforce from 1,100 to 400 and to exit markets in Florida, Ohio, Oregon and Wisconsin. It continues doing business in Illinois, Nevada, Texas and California.

Since the bankruptcy filing, the company has asked the court for two extensions to prepare its recovery plan. The extensions were necessary to continue discussions with creditors on a plan that would be successful, said Love. He was hired in 2005 by the founder's son and longtime leader, David Hill, who died of cancer in July.

"We're looking at all possibilities, and it will be a matter of weeks, not months, when we'll have our restructuring plan in place," Love said.

Kimball Hill's greatest challenge now is the financial crisis that has gripped the markets worldwide. Credit markets have dried up, and with them, some opportunities to quickly resolve Kimball Hill's woes, he said.

"The credit crisis may be a challenge for all companies, even those that are not in Chapter 11," Love said.

The CEO said he is committed to helping Kimball Hill until the plan is filed and approved in court. After that, Love is unsure of his future.

"I've committed to the board and the banks that I'm here to see us through to the best outcome," Love said. "Up to the point when the reorganization is confirmed (in court), I'll be here. After that, I'm not sure what I'll choose to do."

Love also remains optimistic about the housing market, believing it will have a modest upturn next year and down the road.

"Three to five years from now, the housing market will look dramatically different from it does today," Love said.