Tousa, Florida Homebuilder, Files for Bankruptcy

Florida Foreclosure & Real Estate News

By Dawn McCarty

Jan. 29 (Bloomberg) -- Tousa Inc., the homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection as the Florida housing market's decline deepened.

The company, based in Hollywood, Florida, listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Fort Lauderdale, Florida. There were 37 affiliates that also filed today.

Tousa, the largest builder by assets and debts in bankruptcy and at least the 14th to file since June, missed three interest payments this month as home sales and prices fell in Florida, where the company does most of its business. The builder never recovered from the August 2005 purchase of Transeastern Properties Inc., a closely held Coral Springs, Florida-based homebuilder, said Robert Curran, a managing director at Fitch Ratings in New York who covers builders.

``It was too much for Tousa, in the midst of a major market correction -- particularly bad in Florida -- and the addition of Transeastern never got any traction,'' Curran said.

August 2005 proved to be the peak of the market and the acquisition turned out to be a money loser because of the debt it took Tousa to complete the transaction, Curran said.

Florida Sales Fall

``It's possible we'll see more homebuilders, both public and private, file for bankruptcy,'' Curran said. ``As weak as housing has been, a possible recessionary environment will weaken it further still.''

Florida realtor sales fell 29 percent last year compared with 2006, and prices of single-family homes declined 5 percent, according to the Florida Association of Realtors in Orlando. Sales declined 28 percent in 2006 compared with 2005, the realtors said.

Other homebuilders, such as Hovnanian Enterprises Inc., have said that Florida has been a drag on earnings. Hovnanian Chief Financial Officer Larry Sorsby referred last month to a ``Fort Myers effect'' on the Red Bank, New Jersey-based builder's profit margins.

Sales of new homes in the U.S. fell to a 12-year low in December, ending the worst sales year since records began in 1963 and signaling little prospect for a recovery. Foreclosures almost doubled last month from a year earlier.

Tousa missed a Jan. 15 interest payment on $200 million in 7.5 percent senior subordinated notes due 2015. The company also missed a Jan. 1 payment on $300 million in 9 percent senior notes due 2010 and $185 million in 10.375 percent subordinated notes due 2012.

`Realities' of Market

``This action is necessary to reflect the realities of today's homebuilding market,'' Antonio B. Mon, Tousa's chief executive officer, said in a company statement.

Tousa said it has support from more than a majority of senior noteholders on a restructuring agreement calling for an exchange of all unsecured senior notes and other unsecured claims for ``substantially all'' of the new stock. Noteholders and unsecured creditors would receive anything collected by a litigation trust.

The reorganization will be financed with $150 million from Citigroup Global Markets Inc. The company said it intends to continue building and delivering homes without interruption.

The New York Stock Exchange suspended trading in Tousa Nov. 19 because the average price was less than $1 for 30 straight trading days. Tousa fell 1 cent to 13 cents at 12:05 p.m. New York time in over-the-counter trading. The shares reached a high of $30.43 in August 2005.

Builder Bankruptcies

Tousa's bankruptcy filing is at least the fourth by a company with more than $1 billion in assets and debt since April 2007, according to data compiled by Bloomberg. New Century Financial Corp., the biggest subprime lender in bankruptcy, sought Chapter 11 protection that month, listing a total of $1.5 billion in assets and liabilities.

Homebuilders Levitt & Sons LLC, Kara Homes Inc. and Neumann Homes Inc. also sought bankruptcy protection as U.S. home sales and prices slumped. Levitt, based in Fort Lauderdale, is the second- largest U.S. homebuilder in bankruptcy. The Levitt Corp. unit filed for Chapter 11 protection on Nov. 9 with 37 affiliates, submitting schedules listing $340 million in debt.

Kara, based in East Brunswick, New Jersey, was the third- largest U.S. homebuilder in bankruptcy. The closely held company filed for Chapter 11 protection in October 2006, listing debt of $297 million and assets of $350 million. Kara's reorganization plan was confirmed in September.

Tousa, which had revenue of $1.62 billion for the first nine months of 2007, is 70 percent owned by Technical Olympic SA. Tousa's subsidiaries include Newmark Homes LP.

Index Falls

The Standard & Poor's Supercomposite Homebuilding Index has declined 48 percent during the past 12 months and sales of new homes fell to a 12-year low in November. Home prices fell on an annual basis in 2007 for the first time in at least 40 years, according to data released yesterday by the U.S. Commerce Department. Sales of new homes decreased 4.7 percent to an annual pace of 604,000.

U.S. home foreclosures rose 96.8 percent in December from a year earlier, according to RealtyTrac Foreclosure report. An estimated 1.03 percent of homes were in some stage of foreclosure in 2007, up from 0.58 percent in 2006.

Florida had the second-highest number of foreclosure filings and properties in some stage of foreclosure in 2007 behind California. A total of 279,325 foreclosure filings on 165,291 properties were reported in Florida last year.

With more than 2 percent of its households entering some stage of foreclosure, Florida documented the second-highest state foreclosure rate for 2007, more than twice the previous year. Nevada posted the highest foreclosure rate for 2007 of 3.4 percent.

The case is In re Tousa Inc., 08-10928, U.S. Bankruptcy Court, Southern District of Florida (Fort Lauderdale).

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