(WILMINGTON, DE) -- Fairfield Residential LLC, one of the nation's largest merchant builders, is almost $1 billion in debt and has filed for Chapter 11 protection under the U.S. Bankruptcy Code.
The 24-year-old San Diego, CA-based company submitted its bankruptcy filing in U.S. Bankruptcy Court at Wilmington, DE on Sunday (Dec. 13). The filing noted it had about 300 creditors.
The bankruptcy filing listed assets of $958 million and debt of $835 million. The company owes Capmark $79.5 million and Wachovia $18.2 million.
However, the company may also owe up to $3 billion because of guarantees Fairfield has made on individual apartment projects, the company said in court papers.
At least $1.5 billion of that potential debt is related to defaults on loans the company took from Capmark Finance Inc. and Wachovia Bank NA, said Fairfield restructuring adviser Andrew Hinkelman in court papers.
Fairfield also is being advised by Imperial Capital, LLC.
In a prepared statement, Fairfield CEO Christopher Hashioka said he expects to receive new loans shortly to keep the company afloat. Fairfield continues to operate as a going business.
Hashioka was optimistic the company would shortly receive a capital infusion from undisclosed lenders.
"Although the relatively strong demand for multifamily rental units during this recession has allowed our businesses to continue to perform well, the unprecedented collapse of the U.S. real estate and capital markets has made it difficult, if not impossible, for Fairfield to continue without restructuring its financial obligations," Hashioka said in a prepared statement.
On its Web site, Hashioka said Fairfield plans to "conduct its business operations in the ordinary course" while restructuring. It has already reached a tentative reorganization agreement with "significant lender groups," he said.
The company is asking a Delaware bankruptcy court to allow it to keep its existing infrastructure in a new operating company.
"Fairfield expects to emerge from this process and maximize value for all of our stakeholders by creating a stronger go-forward operating platform and continuing to be an active player in the multifamily sector," the company said on its web site.
It said it plans to liquidate some assets through a trust.
Gregg Willett
"They are in a position where they are stuck operating those properties," Willett said. "That has not been their traditional business model. And everybody is at the mercy of trying to get your debt refinanced."
Among the properties Fairfield was unable to refinance was the 438-Gallery at NoHo Commons in Los Angeles. Fairfield has built 64,000 apartments, condominiums and off-campus student-housing units throughout the country.
The bankruptcy is also a blow to the California State Teacher's Retirement System (CALSTERS) and a subsidiary of Mitsubishi Corp., both of which invested in Fairfield over the years.
A Fairfield spokeswoman confirmed that investors, including CALSTERS, would be wiped out by the bankruptcy, but would continue as joint-venture partners on Fairfield projects.
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