American Home Mortgage Investment Corp. has taken a major step in winding down operations.
The Melville, N.Y.-based company, which laid off more than 6,000 production employees Friday, announced today it has filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.
"Under the protection of Chapter 11, American Home will have the time and opportunity to achieve the best possible value for the creditors of its mortgage based assets and related operations, as well as an orderly wind down of the company," the announcement said. "It is highly unlikely that these values will be sufficient to pay its creditors in full, and ... it is realistic to conclude that ultimately there will be no shareholder equity value remaining."
The Alt-A lender said it was forced to halt operations because of extraordinary disruptions in the secondary mortgage market. It stopped accepting new business last Wednesday.
Investors have all but abandoned subprime and Alt-A mortgage-backed bonds, leaving some originators out of business and other scurrying to shift to conforming business that can still be bought by Fannie Mae or Freddie Mac.
In conjunction with the real estate investment trust's bankruptcy filing and subject to court approval, WLR Recovery Fund III L.P., a fund owned and managed by WL Ross & Co. LLC, has agreed to provide up to $50 million in debtor in possession financing for the bankruptcy process, American Home said.
Milestone Advisors LLC has been hired as advisors, Conaway Stargatt & Taylor LLP has been retained as legal counsel and Kroll Zolfo Cooper has been hired to lead the Chapter 11 process, the press release indicated.
American Home Mortgage Lays Off Over 6,000
American Home Mortgage Investment Corp. has laid off most of its staff of more than 7,000.
American Home Pondering Liquidation
American Home Mortgage Investment Corp. has stopped funding loans and is on the brink of collapse.