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Major builder files for Chapter 11
MW Johnson was the 11th-largest home builder in the Twin Cities area in 2007.
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Battered by slow home sales, MW Johnson, one of the state's largest locally owned home builders, has filed for Chapter 11 bankruptcy protection.
The Lakeville-based company cited an "inability to secure additional financing during the continuation of the housing market downturn," but said that the company is working "exhaustively" with lenders to maintain operations as usual. The filing was made late Friday in U.S. Bankruptcy Court in Minneapolis.
The company was the 11th-largest home builder in 2007, based on gross revenues, according to the Builders Association of the Twin Cities, which said that the company had gross revenues of $41,442,924 and built and closed on 177 houses. The firm's Florida division, MW Johnson Construction of Florida, also filed for Chapter 11.
Attorney Michael Meyer of Ravich, Meyer, Kirkman, McGrath, Nauman and Tansey, said that the company plans to complete houses that are under construction provided that lenders will continue to finance construction of those houses and to provide payment to the subcontractors.
"We expect that will happen," said Meyer.
He said that the company has hundreds and possibly more than 1,000 unsold houses and lots in Minnesota, Wisconsin and Florida, including 200 to 300 unsold houses partially or fully built.
In a statement Monday, Bill Johnson, owner and president, said: "We are deeply saddened by this outcome, as it will have a tremendous impact on our ability to maintain our commitments to our customers, subcontractors, employees and suppliers."
He said that over the past 18 months the company has significantly reduced overhead and inventory, but not enough to avoid the filing.
"Our lenders have recently made it very clear that Chapter 11 is the only option they will accept at this point," Johnson said.
During the past several months the company has tried to reduce inventory by auctioning houses with no minimum bid. Meyer said that the company is now down to 30 employees.
"The company ran out of working capital," Meyer said.
The filing in U.S. Bankruptcy Court in Minneapolis listed hundreds of creditors, including a $35 million line of credit with RBC Real Estate Finance. In its filing, the company estimated both its liabilities and its assets at more than $50 million.
Jim Buchta • 612-673-7376
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