April 15, 2010 (FinancialWire) — Orleans Homebuilders, Inc. (OTC: OHBIQ), a bankrupt homebuilder with operations in Pennsylvania and New Jersey, said it has executed an asset purchase agreement with homebuilder NVR, Inc. for an initial "stalking horse bid" for substantially all of the assets of the company. Orleans said that its board has approved the move.

A stalking horse offer is an attempt by a debtor to test the market ahead of an auction, in an effort to maximize the value of its assets as part of bankruptcy court-approved auction process.

The company confirmed that it has received the cash deposit required under the APA.  Orleans said it also filed a motion with the U.S. Bankruptcy Court for the District of Delaware seeking orders to approve the APA as well as the auction and bidding procedures.  

Under the APA, NVR would acquire substantially all of the company's land, work-in-process home construction and intangible assets for communities in each of Orleans’ existing regions for an aggregate purchase price of $170 million, subject to certain working capital and other adjustments.

More specifically, the APA provides for the acquisition of substantially all of Orleans’ assets, including land, lots, work-in-process units under construction at substantially all of the company's currently active and future communities, plus acquisition of its interests in joint ventures and other controlled interests in land, customer deposits, trademarks, and intangible assets.

Under the APA, NVR will also assume certain specific liabilities, including the assumption or replacement of an aggregate of around $52.6 million of bank letters of credit and external surety and other performance bonds related specifically to the acquired assets.

The APA specifically excludes the company's two communities in New York State, which are anticipated to be sold separately by Orleans and which represent around 200 lots and work-in-process units of the company's total roughly 4,300 lots and work-in-process units.

The assets to be sold under the APA generally also do not include Orleans’ community property management subsidiary; the company's mortgage broker affiliate; income tax refunds and other cash balances; or the cash surrender value of the Company's corporate-owned life insurance policies.

The APA also provides for the continued construction and closings of all homes currently under construction in the acquired communities.  Orleans and NVR said they plan to honor the backlog contracts on homes under construction with homebuyers throughout the process, including escrowed customer deposits.\

Orleans had previously announced the execution of a non-binding letter of intent relating to the sale of the company; however, it said it was unable to complete the sale prior to its Chapter 11 filing on March 1. Orleans said the non-binding letter of intent was not with NVR.

The company recently received a federal income tax refund of around $18.2 million related to the federal income tax return in respect of 2008, filed on December 18, 2009, which was as a result of the passing of government's five-year tax loss carry back provision in late calendar 2009. This refund was paid to lenders pursuant to the terms of the credit agreement.

Orleans also said it plans to immediately file an amended 2008 federal tax return, which would entitle it to receive an additional federal income tax refund of around $3.5 million.  

NVR is a U.S. homebuilding and mortgage banking firm.

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