Woodside Homes Corp., a Utah-based homebuilder with nine Valley community locations, agreed to declare Chapter 11 bankruptcy reorganization by mid-September after falling victim to the economic downturn, a company spokeswoman said.
Jennifer Mercer blamed the tightening of the credit market and the devaluation of land as the causes for the company's problems.
"These extenuating circumstances require the company to reorganize its business to align with and better compete in the current market," Mercer said in a statement.
Despite the company's bankruptcy plans, Woodside intends to continue building and selling homes at its locations in Phoenix, Tempe, Chandler, Mesa, Queen Creek and Litchfield Park.
"All employee wage and benefit programs will continue uninterrupted as will customer programs," Mercer said. "Additionally, the company has been proactive with its subcontractors, updating them daily as to the status of these proceedings."
The decision to move toward bankruptcy came to a head last week when a faction of Woodside's creditors filed a petition in a California U.S. Bankruptcy Court attempting to force the homebuilder into bankruptcy.
Five insurance companies and 14 bank creditors asked the court to compel Woodside into bankruptcy, so they could collect on what they say is more than $700 million they're owed. Woodside later consented to file Chapter 11 by Sept. 16.
The effort, spearheaded by JP Morgan Chase, aimed for a better restructuring effort from Woodside and more transparency in its organization, said Donald Gaffney, an attorney working on Chase's behalf.
"This puts the company under the supervision of the courts," he said. "The short-term goal is to get transparency. The long-term goal is to get repaid."
Mercer, the Woodside spokeswoman, said that the company has been working on restructuring for six to seven months, but hasn't gotten much traction because of the sagging housing market.
"Transparency to our employees, customers, and subcontractors and vendors is a priority, as Woodside considers them partners," she said.