JPMorgan Chase Bank NA, representing a group of banks, and five insurance companies filed requests earlier this month to force Woodside into bankruptcy, saying it had defaulted on more than $730 million in debt.
In court documents, the North Salt Lake-based builder said it will put the company and its affiliates under bankruptcy court protection by Sept. 16.
The filings put the spotlight on a privately held and publicity-shy Utah company that was founded in 1977.
Noteholders involved in the bankruptcy include John Hancock Life Insurance Co., AXA Equitable Life Insurance Co., Metropolitan Life Insurance Co., New York Life Insurance Co. and Security Life of Denver Insurance Co., which as a group filed to force Woodside into bankruptcy on Aug. 20, saying it defaulted on more than $400 million in debt. New York-based JPMorgan joined the request that day, saying it was agent for a group of banks owed another $330 million on a defaulted loan.
Woodside continues to build and sell homes and pay employees and subcontractors, said Jennifer Mercer, a crisis management professional hired by the company to serve as its spokeswoman.
She said Woodside doesn't believe it will need a loan to fund operations during Chapter 11.
"The company has ample cash on hand to continue their operations," Mercer said.
She said the company had no statement as to "why it's in the position it's in."
Builders nationwide are suffering through a particularly dogged real estate downturn.
Aside from Utah, Woodside builds in Arizona, California, Colorado, Florida, Minnesota, Nevada, Texas and the Washington, D.C., suburbs. Arizona, California, Florida and Nevada's real estate markets are among the hardest-hit by the national real estate downturn.
While sales in Utah were good early last year, by last summer market conditions had deteriorated as years of price run-ups made homeownership less attainable to a growing number of Utahns. Tighter lending standards put in place last summer after the nation's subprime lending debacle have made it more difficult for people to qualify for home loans.
Woodside took out permits for the construction of nearly 450 homes along the Wasatch Front in 2006, according to Construction Monitor, a service that tracks home building activity throughout the West. By last year, that number had fallen to only 250. With only four more months left to go this year, the company has taken out only 180 permits.
Woodside's agreement not to contest the bankruptcy followed an Aug. 21 motion by the noteholders to limit Woodside's business activities while U.S. Bankruptcy Judge Peter Carroll considered their involuntary bankruptcy request.
Woodside reorganized its corporate structure and triggered tax losses that benefited Woodside's equity holders, mainly Ezra Nilson and his family, without informing creditors during debt restructuring talks, the noteholders said in their filing.
"The noteholders formed the view that a restructuring with the current equity holders and the current senior management team is not possible," according to the filing. Mercer said she doesn't know what will happen to Woodside's current management team, but said no changes have yet been made.
Under the agreement with creditors, Woodside agreed to only use or sell property "in the ordinary course of business," before it enters bankruptcy.
The company can complete existing home sales, write new sale contracts and refund homebuyers' deposits. Woodside can't sell assets, make large investments or transfers to nonbankrupt affiliates, or buy large land parcels without court permission.
The announcement - and the magnitude of the dispute between Woodside and its creditors - surprised many in Utah's home building industry this week.
"I am sorry to hear this news but wish Woodside the best as they restructure their company," said Clark Ivory of Ivory Homes, Utah's largest builder.
"The builders in the best shape right now are those who have paid down debt during the good times," Ivory added. "Fortunately for us, we've paid off 65 percent of our debt over the last two years."
* WHERE IS IT BASED? North Salt Lake.
* WHERE DOES IT BUILD? In Utah, the company's subdivisions include the large Foxboro development in North Salt Lake as well as Hunters Creek in Farmington and Quail Crossing and Sunset Equestrian Estates in Kaysville. Woodside also builds in Arizona, California, Colorado, Florida, Minnesota, Nevada, Texas and the Washington, D.C., suburbs.
* WHAT HAPPENED THIS WEEK? The company allowed its creditors to force it into Chapter 11 bankruptcy, which allows companies to remain in business while restructuring their debts. Creditors often will take this pre-emptive action in hope of getting a restructuring plan in place before it's too late.
* WHAT HAPPENS NOW? A Woodside spokeswoman said the company continues tobuild and sell homes and pay its employees and subcontractors and will do the same even after the company goes under bankruptcy court protection Sept. 16.
