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Streamwood-based Kirk Corp. files for Chapter 11
By Anna Marie Kukec | Daily Herald Staff

Kirk Homes, builder of this model at Apple Creek Estates in Woodstock, has filed for Chapter 11 reorganization.

 

George LeClaire | Staff Photographer

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Published: 5/13/2009 1:21 PM | Updated: 5/13/2009 6:30 PM

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Buyers of Kirk Homes in Hoffman Estates, Lakemoor, Woodstock and Bolingbrook were told Wednesday that they can still close on their new homes despite a Chapter 11 filing Tuesday by the Streamwood-based builder.

Parent company The Kirk Corp. filed for reorganization in U.S. Bankruptcy Court, following other homebuilders nationwide, including Rolling Meadows-based Kimball Hill and Warrenville-based Neumann Homes.

Company officials worked Wednesday to contact and reassure buyers of their homes. Lakemoor Village President Virginia Povidas expressed support for the company, which has two developments in her town. But she said she is concerned about the future of the planned development between Route 120 and Lincoln Road, where construction has not yet begun.

The village has, as it does with all developers, a letter of credit that guarantees that all the work will be completed," she said.

"We hope at this point that their reorganization goes well and they'll continue to build and sell homes here," Povidas said. "They've done a beautiful job so far and we're checking on what still needs to be finished."

Founded in 1978, Kirk was one of the largest regional homebuilders with more than 50 neighborhoods throughout Chicago and the suburbs. Unlike Kimball Hill, Kirk did not venture outside of Illinois.

Kirk Chief Executive Officer John Carroll vowed to keep the company viable, despite a deteriorating real estate market and ongoing economic fears.

"I've been talking to possible sources of capital," Carroll said during an interview.

Chapter 11 allows companies to keep creditors at bay while it reorganizes and works out agreements with creditors, vendors and other customers. The privately held Kirk said in its bankruptcy filing that it has about $96.8 million in assets with about $64.5 million in debt. It was profitable up until 2008, when it had its first loss. It started streamlining, such as cutting its work force froqm 40 to 20.

"Last year, we were not doing great, but we were muddling through," said Carroll. "But when the credit crisis hit last fall, we felt a lot of air went out of the balloon. People just couldn't get financing and fear was pulling other buyers away. That's when it really intensified."

The company could be acquired or it could form a partnership with investors. Another option would be to sell some assets, such as lots where homes haven't been built yet, including in Woodstock or Lakemoor, Carroll said.

Overall, Kirk intends to complete construction on three homes that are unsold. Another 19 homes have been sold and are on track to close by June. Fifteen more homes are completed and sold and are backlogged in the closing process, Carroll said.

The newly constructed homes continue to have 10-year warranties backed by Residential Warranty Corp. LLC of Harrisburg, Pa., which is unassociated with Kirk, Carroll said.

Kirk will have 60 to 120 days to start the reorganization process and get a plan approved by the court.

Managers on Wednesday were personally calling buyers about the bankruptcy filing.

"We want to reassure buyers that their money is not at risk here," Carroll said. "This is about keeping the doors open."

Carroll himself also was calling town mayors and presidents.

"What are we telling them? We're telling them the truth," Carroll said. "We've been in business for 30 years and we intend to stay in business another 30 years."

History of Kirk Homes

•1978 - Company founded by Donald Kirk

•1993 - Completes 5,000th home in tandem with 15th anniversary

•2005 - Becomes one of the first new-home builders in Woodstock as Apple Creek Estates opens

•2006 - Closes on more than 400 homes

•2008 - Celebrates 30th anniversary, starts streamlining, records first loss of profits for the year

•2009 - Files chapter 11 bankruptcy reorganization

Source: Kirk Homes