UPDATE 2-Orleans Homebuilders files bankruptcy, seeks buyer

Mon Mar 1, 2010 6:41pm EST

* Homebuilder files with Delaware bankruptcy court

* Filing follows default on credit facility

* Company plans to seek a buyer (Adds CEO and company statement, byline)

By Jonathan Stempel

NEW YORK, March 1 (Reuters) - Orleans Homebuilders Inc OHB.A, a housing developer operating mainly in the eastern United States, filed for bankruptcy protection on Monday after defaulting on a credit facility last month, and said it plans to seek a buyer.

The Bensalem, Pennsylvania-based company and several dozen affiliates filed for Chapter 11 protection from creditors with the U.S. bankruptcy court in Delaware.

Orleans said it had $440 million of assets and $498.8 million of liabilities as of Dec. 31.

Its Alambry Funding mortgage services unit is not part of the bankruptcy filing.

In a statement, Chief Executive Jeffrey Orleans said the company planned to seek a buyer through a negotiated sale, reorganization plan, or court-supervised auction.

It plans to continue normal operations while in bankruptcy.

Orleans joins a growing list of residential and commercial real estate companies to seek bankruptcy protection.

Most analysts have yet to call a bottom in the roughly three-year U.S. housing downturn, and many believe the commercial real estate slump will deepen for the next several months or more.

Last month, Orleans said it defaulted on a $350 million credit facility after failing to win the consent of all 17 bank lenders needed to extend the maturity.

It said it had $311 million of cash borrowings outstanding under the facility, excluding letters of credit.

Jeffrey Orleans said the company's residential revenue fell by roughly two-thirds over its last three fiscal years, to $322 million in fiscal 2009 from just under $1 billion in fiscal 2006. He owns 59 percent of the company, the petition shows.

Orleans said it builds single-family homes, townhouses and condominiums in 11 markets -- southeastern Pennsylvania; central and southern New Jersey; Orange County, New York; Charlotte, Raleigh and Greensboro, North Carolina; Richmond and Tidewater, Virginia; Chicago; and Orlando, Florida.

The company plans to seek court approval for up to $40 million in financing to keep operations while in bankruptcy. It said it hired FTI Consulting Inc as its restructuring adviser and BMO Capital Markets as its mergers adviser.

Shares of Orleans last traded on Feb. 26 at 69 cents on the American Stock Exchange.

The case is In re Orleans Homebuilders Inc, U.S. Bankruptcy Court, District of Delaware, No. 10-10684. (Reporting by Jonathan Stempel; Editing by Ted Kerr)