WCI Communities and about 130 of its subsidiaries have filed for Chapter 11 bankruptcy.
WCI, one of the nation's largest homebuilders, says they sought protection to restructure their debt and capital after failing to meet its August 5 deadline for restructuring $125 million in convertible bonds.
WCI is one of many homebuilders feeling the effects of the slowing housing market. Data from the U.S. Department of Commerce shows total housing starts dropped 36 percent in May.
The company reached an agreement with its principal secured lenders for more than $50 million to continue operating its business on an interim basis.
WCI says it also received a proposal from senior lenders for an additional $100 million of excess liquidity through a debtor in possession loan facility.
"The company, with all diligence, has attempted to avoid a bankruptcy filing. However, the filing became necessary," says WCI chairman Carl Icahn.
Icahn, who owns 15 percent of the company, offered to acquire the company in March 2007 for $22 per share.
WCI offered to exchange the debt for new bonds and stock warrants. Holders rejected the offer and insisted on being paid cash in full.
The company has $2.18 billion in assets and $1.92 billion in debts, according to its bankruptcy petition.
Jerry Starkey, the company's CEO since 2005, is leaving after agreeing with WCI on a severance package. David Fry will serve as interim president and CEO.
"Day-to-day operations will continue as usual, while we work with our stakeholders to restructure the balance sheet," Fry says.
"We will continue to sell, build and deliver homes without interruption. Construction and sales activities will continue; employees will come to work and be paid."
The company's Watermark real estate brokerage is excluded from the chapter 11 filing.
The company's stock plunged 48 percent to 66 cents per share on Monday.