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In its 2007 annual report, Guaranty Financial Group Inc. described its practice of lending to homebuilders as "a long-time core competency for us." But in the short time that has followed the publication of that document, the continued downturn in residential real estate markets around the country has turned that homebuilder portfolio into a core liability for the Austin, Texas-based institution.
To be sure, Guaranty Financial is just one name on a long and growing list of individuals, investors, corporations and government bodies that placed big bets on the continuation of the housing boom across the United States and lost. But relative to its modest asset size -- $15.4 billion as of Sept. 30, 2008 -- Guaranty Financial's core operating unit has achieved a troubling level of ubiquity in recent bankruptcy petitions filed by private homebuilding concerns.
Three of the previous five news articles written by SNL Financial that include mentions of Guaranty Financial and/or its units through Feb. 19 related to bankruptcy filings by private homebuilders. Most recently, unit Guaranty Bank was linked to the Feb. 19 bankruptcy filing of WL Homes LLC, a Southern California builder owned by a Dubai, United Arab Emirates-based real estate development firm that does business as John Laing Homes. The homebuilder owes Guaranty Bank $8.9 million under a credit facility secured by unidentified assets.
That is only a small fraction of the approximately $351 million in outstanding secured liabilities that WL Homes reported in court documents -- a host of national and regional financial institutions are on the hook for the bulk of that debt. It is also a smaller sum than two others to which Guaranty Bank has been linked in bankruptcy petitions filed by large private homebuilders within the last month.
The thrift was a participant in the five-bank syndicate for a $250 million unsecured revolving line of credit extended to Tempe, Ariz.-based Fulton Homes Inc. Court documents filed by Fulton Homes in conjunction with its Jan. 27 bankruptcy petition indicate that the five banks have unsecured claims totaling $163.5 million, but they did not break down the allocation by each of the participants in the syndicate.
On Jan. 16, Texas homebuilder Wall Homes Inc. filed for protection under Chapter 11 of the U.S. Bankruptcy...