There are many places in a bankruptcy docket to investigate the minimum price which a distressed builder will sell the property. One type of filings to look out for is the affidavits by senior managers of the builders or the Chief Restructuring Officer.

These personnel will usually make affidavit describing details of the situation which the bankrupt builder is facing, attaching important exhibits with liquidation values and expected sale prices. See the sample exhibit below.

This is an excerpt of a detailed status report from the Chief Restructuring Officer of John Laing Homes In May 2009. How do we find and make use of these exhibits?

In the above sample, the left-most column provides the name of the real estate development and the right-most column provides comments on the net realization value of the assets in a piecemeal liquidation under Chapter 7.

For example, in relation to the Serrawood Lots, the builder expects to let the property go for $50K/lot in a forced sale. Why would the builder release such information into the public arena?

Going back to the situation in John Laing Homes, the Chief Restructuring Officer provided the report to support the builder’s motion for debtor-in-possessing financing, sale of real estate assets, and most importantly, in opposition to a motion to convert the case to Chapter 7.

To achieve these objectives and recommend another course of action (reorganization in this case), he had to provide numbers and details to back up his claim that the best way to maximize the value of the assets is through a Chapter 11 reorganization process. This came in the form of a status report outlining the estimated liquidation versus going concern values.

The main implication from this is that one will have to hunt for objections to motions to convert the case to Chapter 7 and affidavits (including expert testimony) supporting why the builder should be kept as a going concern. The most important part of these court filings usually lies in the attached exhibits.