Kimball Hill closing mortgage arm, hiring turnaround firm

Landmark suburban homebuilder Kimball Hill Inc. said Thursday it is closing its KH Mortgage unit and hiring a turnaround firm to help it head off Chapter 11 bankruptcy protection.

The Rolling Meadows-based builder warned "cross-default" risks exist in the coming weeks and it may not be able to remain compliant to its loan agreements.

"There are substantial doubts about whether the company will be able to continue as a going concern," the firm's auditor said recently in a filing with the Security and Exchange Commission.

It added that it hired New York-based consulting firm Alvarez & Marsal North America to consider "a number of alternatives, including the appointment of a chief restructuring officer and whether to seek a complete restructuring under Chapter 11 of the United States Bankruptcy Code."

A key developer of several Northwest and West Chicago suburbs, including Rolling Meadows, Kimball Hill has been laboring under the weight of a $500 million line of credit and a simultaneous housing depression. After expanding nationally in recent years to hot housing markets in California, Florida and Nevada, those same markets are now suffering the most in the worst housing downturn in years.

Kimball Hill also revealed it is in a joint venture in Nevada for two tracts of land, on which it now maintains significant debt, according to the filing. The joint agreement also calls for additional financial transactions in the coming weeks, involving additional debt, which could result in the default in that agreement, too.

Kimball Hill Chief Executive Officer Kenneth Love was not available for comment this morning.

Kimball Hill has several projects under way in the suburbs, including Sugar Grove, where its Settlers Ridge had planned to develop 2,470 homes on 1,300 acres. Just 150 to 200 permits have been applied for, according to Sugar Grove officials.

The company has been led since 1969 by area philanthropist and Harper College Trustee David K. Hill, who gave up his role as chief executive officer last year and still serves as chairman of its board. He is the son of founder Kimball Hill.

Warrenville-based Neumann Homes filed for bankruptcy in the fall.