Maronda Homes files for bankruptcy after loan changes fall through

By Caroline Salls

Pittsburgh, April 19 - Maronda Homes, Inc. filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the Western District of Pennsylvania.

The company said it was left it with no access to borrowing, and all of the proceeds of sales of Maronda's properties subject to mortgages were being taken by its lenders and applied to reduce debt.

Specifically, the company said 13 of the 14 lenders under its $210 million credit agreement had agreed to proposed changes that would restore Maronda's liquidity that was being drained as a result of a new practice of the lenders to retain 100% of net closing proceeds.

However, Huntington Bank, which represented just 6.7% of the amounts loaned under the credit agreement, refused to consent to the changes.

Maronda said Huntington eventually said that full repayment was the only alternative it would accept to collecting 100% of the net mortgage proceeds. Huntington also said it would prefer the company file for bankruptcy so the bank's personnel would not need to "waste their time" discussing alternatives to bankruptcy.

"Maronda faced the consequences inherent any time lenders holding security threaten to take action with respect to the assets of a borrower," the company said in a court filing.

"Given the situation with the lenders, the resulting lack of liquidity, absence of credit availability and threatened foreclosure of its assets would lead inevitably to Maronda's inability to pay its debts as they become due."

In connection with the bankruptcy filing, Maronda requested court approval to use the cash collateral to fund its operations while in bankruptcy.

According to court documents, Maronda has $100 million to $500 million in assets and $50 million to $100 million in debt.

As of Monday, the company said the amount borrowed or available to fund outstanding letters of credit under its credit agreement was roughly $98 million.

The company did not list any unsecured creditors with claims of $1 million or more.

Maronda is represented by Manion McDonough & Lucas.

Maronda is a Clinton, Pa., homebuilder. The Chapter 11 case number is 11-22418.

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