Current news for this company:
Kimball Hill - Residential, Chicago-area
Kimball Hill has filed Chapter 11 bankruptcy. In statement posted on its web site Kimball Hill said:
"Financial, not operational"—that about says it all. Very telling regarding the nature of the current crisis.
We wish the best to all employees and customers of Kimball Hill and hope this will be resolved for them with a minimum of pain and dislocation.
Ailing Post, 2008-02-17:
Kimball Hill, while a Chicago-centric builder, appears to have grown too aggressively with developments and joint ventures around the country in an attempt to opportunistically "ride the bubble". That business decision has now burned them badly. Quoting from the first article above:
At least one observer with experience in corporate turnarounds is quite bearish on the company:
Kimball Hill is another unfortunate case of company which is so longstanding as to nearly be an institution, today being done in (or "doing itself in") through historic credit bubble excess.
The company was not incorporated until 1969, but actually began in 1953 when a lawyer named Kimball Hill bought up land ear marked to be a golf course. On the would-be greens and fairways he built what they don't build today: community. Conducting business in stark contrast to the Countrywide shark sellers of today, Hill built homes that
'..., were affordable and if the family couldn't pay the 10 percent down, $10 or $25 would do'
Returning WWII vets and generations thereafter came to thrive in the booming suburb built by Kimball Hill—"Rolling Meadows." It would be fair to say Hill poured his self into the town he built, and that it is reflected in ways not measured on the balance sheet or metrics seen by analysts and rating agencies.
Hill's son David took over the helm in 1969 and has since guided the ship steady. In 2005 the company reported record margins and seemed well prepared to weather another impending housing downturn. As recently as January 2006 the company was seemingly in control of its fate:
'With quick wits and fast feet, Kimball Hill Homes Chairman David K. Hill survived the crash of housing markets in California, Nevada, Florida and Illinois during 2006. Now he's gathering his energy to deliver a knockout blow in 2007.'
But the first sign something was going wrong in the above is that the company apparently thought that what happened in 2006 was "the crash". Now we know that was not the case. Later the company admitted that in the first quarter of 2006, the first counter-punch was in fact delivered:
' "Our wake-up call came in January 2006," he says now. "We were lulled to sleep during our first quarter of fiscal 2006 (October through December 2005) because we had the best margin closings in the history of the company. When we looked at declining sales, it was easy to attribute them to seasonal factors. "But in January, we saw the handwriting on the wall. '
'...,its net worth fell below levels for one of the covenants in its senior credit facility. Being in violation of that covenant limits the company's access to an estimated $100 million within that $500 million credit facility, which is why Standard & Poor's and Moody's last week downgraded their respective credit ratings of Kimball Hill, and S&P placed the builder on Credit Watch. " '
These sort of events sealed the downward-spiral dynamic for Kimball Hill, from which it has found no reprieve, as every indication is that the market is nowhere near bottom.
Kimball Hill, which filed for protection from creditors on April 23, cited the recession and âescalating turmoil in the credit marketsâ as the reasons for the decision to begin winding down its operations and focus on selling itself off. âGiven the current housing and financial market conditions, we are simply unable to conduct normal operations while the company continues its sales efforts,â Mr. Love said in a news release. The decision is supported by the companyâs senior lenders and the committee of unsecured creditors, Kimball Hill says. The company said it has ample cash to complete homes that are already under construction.Permalink
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Important: This company is on our list of builder operations that have "imploded" (see also ailing lenders). This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid declines in enterprise value; or abnormal "bail-out" by corporate parents or peers in order to continue to operate. The builders may be residential or commercial.