Residential real estate developer Tarragon Corp. said Monday that it and some of its subsidiaries have filed for Chapter 11 bankruptcy protection because of financial losses caused by falling prices and slower sales in its home building division.
Tarragon said its goal was a comprehensive reorganization of the company. Tarragon will seek additional outside financing and participation of a new investor or investor group, the company said in a news release.
Tarragon said it has received a commitment for debtor-in-possession financing from an affiliate of ARKO Holdings Inc., an Israeli company. The bankruptcy cases were not expected to result in any distribution to Tarragon's equity holders, the company said.
The company said it has "adequate current liquidity" and the filing is not expected to impact the daily operations of the management subsidiary, Tarragon Management Inc., or the operation of the rental apartment properties in Tarragon's Investment Division.
The filing was made in bankruptcy court in the district of New Jersey.
Tarragon Chief Executive William S. Friedman said the decision to restructure was made in the face of the tough real estate sector and tight credit markets.
"Based on the discussions we have had with our unsecured note holders and the financial support of ARKO, we expect that we will be able to structure a consensual plan with our creditors structured to enable Tarragon to preserve the value of its property management and development platforms and maximize any return to creditors," Friedman said.
Tarragon Corp. develops multifamily housing for rent and for sale, with operations concentrated in the Northeast, Florida, Texas and Tennessee.
Shares fell 5 cents, or 52 percent, to 5 cents in morning trading.