American Home to pay fraction of bankruptcy claims

NEW YORK Tue Aug 19, 2008 9:42am EDT

NEW YORK (Reuters) - American Home Mortgage Investment Corp (AHMIQ.PK), which was among the largest U.S. home loan providers before seeking bankruptcy protection a year ago, said it will pay unsecured creditors no more than 5.9 cents on the dollar as it liquidates assets.

In a disclosure statement filed Friday with the U.S. bankruptcy court in Wilmington, Delaware, the company said many unsecured creditors will recover zero to 2.2 cents on the dollar on their claims.

Creditors whose claims are backed by collateral will recover the full amounts owed, it said. Shareholders will get nothing.

American Home and seven affiliates estimated they had $210 million of cash as of June 30, several court filings show.

The disclosure statement will be mailed to creditors so they can vote on Melville, New York-based American Home's Chapter 11 liquidation plan.

U.S. Bankruptcy Judge Christopher Sontchi must approve the plan, which American Home also filed with the court.

American Home filed for bankruptcy protection on August 6, 2007 after falling home prices and a surge in borrower defaults led to major write-downs, prompting margin calls from the company's own lenders.

The company's collapse remains one of the largest since the nation's housing slump began. American Home sought protection four months after similarly-sized subprime lender New Century Financial Corp filed for protection from its own creditors.

Like IndyMac Bancorp Inc IDMC.PK, which collapsed last month, American Home specialized in "Alt-A" mortgages, which typically went to people with good credit but who did not need to fully document income or assets.

American Home made about $58.9 billion of home loans to about 196,000 borrowers in 2006. It sold its loan servicing business last year to billionaire Wilbur Ross for about $500 million, and has been selling other assets to pay debts.

The company said it now employs 39 people, down from about 7,400 prior to the bankruptcy.

In the disclosure statement, American Home it would likely convert its case to Chapter 7 if its liquidation plan were not approved. It said this would cause "substantially diminished" recoveries for creditors and an "immense waste" of resources.

American Home shares rose 1 cent to 4 cents in morning trading on the Pink Sheets.

(Editing by Gerald E. McCormick)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.