$32 million in personal guarantees by construction industry leader left in place
SANTA ROSA -- Developer and general contractor Wendell "Del" Nordby III has emerged from U.S. Bankruptcy Court protection after creditors signed off on a reorganization plan for his personal finances.
Mr. Nordby, chief executive officer of Nordby Construction of Santa Rosa, filed for Chapter 11 reorganization on Feb. 1, listing $52.5 million in debts and liabilities and $1.6 million in assets.
The company and sister operations Nordby Signature Homes and Nordby Wine Caves haven't filed for bankruptcy.
"We're still chasing work," Mr. Nordby said.
Key to the listed liabilities were $32 million in personal guarantees Mr. Nordby made in the past several years on a number of residential projects and property investments, according to court documents.
The value of many of the properties decreased as much as 70 percent as the economy contracted in the past two years, and lenders demanded investors to immediately pay down the balances, according to court documents and a letter Mr. Nordby sent to customers and business partners dated May 17.
"I was successful in negotiations with most of the banks," he wrote in the letter. "However, I reached an impasse with a few."
As part of the reorganization plan, the personal guarantees would remain in place and would move in to share the unsecured-creditor pool of funds if payment were demanded, according to the document. Negotiations on many of the liabilities are currently under way.
Under the reorganization plan, confirmed in court April 20, Mr. Nordby would continue to make payments on his homes purchased in 2008 in Sebastopol and on the Oregon coast and on a 2005 Acura automobile, according to the document.
Unsecured creditors would be paid over seven years from $11,200 received quarterly via a loan Mr. Nordby made to Rick Shone, president of Nordby Wine Caves. The total pool available is estimated to be $313,600.
The abrupt slowdown in construction activity forced Mr. Nordby to not draw his salary from the construction company for months, and that loan payment is his main source of income, according to court filings.
Currently in the unsecured creditor pool is Fremont Bank, which provided a $324,000 line of credit, and Wells Fargo Bank, which provided a $750,000 line of credit now totaling more than $800,000 with interest. Fremont Bank backed the plan, but Wells Fargo objected to both getting only 30 percent of what's owed while Mr. Nordby would retain his stake in the investments, the documents said.
The personal guarantees largely came via Nordby Development LLC, of which Mr. Nordby is a 60 percent owner, according to court records. The entity has minority stakes in new construction such as The Moore Building in downtown Santa Rosa and planned development projects. Pending projects include apartments in Sebastopol, a 100-home development called Cedar Grove Homes to be done with North Bay Construction founder John Barella in Petaluma, more than 200 homes at Windsor Mill in Windsor and at least two in Oregon.
Nordby Development owns a third of DDB Residential Partners LLC, which was set up to raise money for development projects. DDB secured the Wells Fargo credit line to cover loans to an Oregon coast project led by Rooty LLC, in which Nordby Development has a 21 percent stake.
Wells Fargo sued DDB, which has no assets, in Sonoma County Superior Court to obtain funds from guarantors of the credit line, according to court documents. That lawsuit prompted Mr. Nordby to file for Chapter 11 reorganization.
Rooty was developing 27 single-family homes on two acres in the Oregon coast community of Gold Beach. Sterling Savings Bank loaned $3.7 million for the project, which recently was appraised at $700,000, according to court documents.
No payments had been made for more than a year by the time the reorganization plan was approved, the records said.
