Submitted by Jen Jones on Mon, 07/06/2009 - 10:04am
As you might imagine, one of the major casualties of the housing bust has been the collapse of home construction suppliers all around the country. The livelihood of these companies depends upon a thriving housing market in which homebuilders are buying windows, paneling, roofing, and other construction materials. But that's not happening. The credit crunch, rising unemployment, and unstable home prices have kept potential home buyers out of the market, along with home builders.
Stock Building Supply is one of the many home construction suppliers caught up in this turmoil. Stock was founded as Carolina Builders almost 100 years ago in Raleigh, North Carolina. Historically, the company has been among the nation's largest home building suppliers. But since the housing slump took hold, Stock has been forced to cut more than 11,000 jobs. The supplier ended up in such bad shape that its parent company, Wolseley PLC (a global distributor of building materials) talked of shutting it down earlier this year.
Fortunately, Wolseley found a buyer for Stock a couple of months ago. The Gores Group, a Los Angeles-based private equity firm, agreed to take over Stock. Gores has since invested $75 million into Stock and has extended the company $150 million in credit. But one of the conditions of the takeover was that Stock reorganize its debts through bankruptcy. Last month, Stock did just that. It filed a petition for Chapter 11 bankruptcy, and the bankruptcy court confirmed its reorganization plan.
Last week, Stock announced that it's ready to emerge from bankruptcy. The company is optimistic about the future. In a prepared statement, president Joe Appelmann said, "We are emerging with the strongest balance sheet and financial foundation of any of our competitors. We are re-focused on our core markets and well positioned for the upturn in the housing market.-
Gores is also confident about Stock's success. Timothy Meyer, Gores' managing director, said, "The proactive steps Stock has taken to address the issues facing our business and the entire homebuilding industry will eliminate uncertainty about our future. ... We're confident the company is now well positioned to operate profitably in the current environment and capitalize on its full potential.- Gores' plans for the company to focus on 19 markets in 11 states and the District of Columbia, and to keep its operations in the Triangle, Triad, and Charlotte areas of North Carolina.
Stock is undoubtedly in a better position after the bankruptcy reorganization and the infusion of cash it has received through the Gores takeover. But there's also no question that Stock faces a rough road ahead. While the company may be "well positioned to operate profitably in the current environment,- it's still a very unfriendly environment for a home construction supplier trying to make a profit. And, most experts agree that we're a long way from the "upturn in the housing market- Stock is counting on.
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