American Home Mortgage Investment Corp., once one of the nation’s largest mortgage lenders, said it expects to pay unsecured creditors no more than 5.9 cents on the dollar as it liquidates assets.
The bankrupt company that was structured as a real estate investment trust made the projection in a disclosure statement with the U.S. bankruptcy court in Delaware, according to Reuters. American Home Mortgage also said that many unsecured creditors will recover zero to 2.2 cents on the dollar on their claims, with stockholders receiving nothing. On the other hand, creditors whose claims are backed by collateral will recover the full amounts owed.
With pennies so much in the company’s news, its Pink Sheet shares rose a penny a share in value, $0.04 in early Tuesday trading.
American Home filed for bankruptcy protection on Aug. 6, 2007. It had been among the companies specializing in what are known as “Alt-A” mortgages, which typically went to people with good credit but without a need to document fully income or assets, Reuters said. American Home sold its loan servicing business last year to billionaire Wilbur Ross for about $500 million.
Reuters said that American Home also disclosed that it will likely convert its case to Chapter 7 if its liquidation plan were not approved. This would cause “substantially diminished” recoveries for creditors and an “immense waste” of resources, it said.