Neumann Homes files for bankruptcy
Neumann Homes filed for bankruptcy Thursday, becoming the second-largest such company to seek Chapter 11 protection from creditors as the U.S. housing recession enters its third year.
The Warrenville-based company has assets and debt of more than $100 million each, with as many as 5,000 creditors, it said in a Chapter 11 petition in U.S. Bankruptcy Court in Chicago.
It said last month it shut its offices and fired 110 of its 130 employees.
Neumann, the fourth-largest homebuilder in Chicago by units, cited inadequate funding and drops in building of 50 percent to 80 percent in Chicago, Denver and Detroit, its three largest markets. In Detroit, the slump cost the company $60 million in losses in the past two years, it said in an Oct. 22 statement.
"This is one of the first in a series of bankruptcies we're going to see in the industry, due to the overall crisis in the housing market," said Alex Barron, an analyst at Agency Trading Group Inc. in Wayzata, Minn.
The closely held company said prices are down as much as 25 percent in some places. Neumann's units in Colorado and Wisconsin also filed Chapter 11 petitions in the Chicago court.
Neumann said in the statement it was working with secured lenders to complete homes under construction. Deposits on homes not yet being built are in escrow and will be returned if the bankruptcy court agrees, the company said.
Chief Executive Officer Kenneth Neumann didn't immediately return a call seeking comment.
Kara Homes Inc., based in East Brunswick, N.J., is the largest U.S. homebuilder in bankruptcy. The closely held company filed for Chapter 11 protection a year ago listing debt of $297 million and assets of $350 million.
New-home starts fell 24 percent to 5,906 in the second quarter from the same period a year earlier in the Chicago metropolitan area, according to Metrostudy, a Houston-based housing industry research company. Closings plunged 40 percent to 5,152 in the second quarter compared with a year earlier.
Neumann Homes was founded in Wisconsin in 1980 by Mark Neumann, who later served as a U.S. congressman, according to the company Web site. His brother is the current chief executive officer. In January 2005, the company bought Troy, Mich.-based Tadian Homes.