Carl Icahn's housing company files for Chapter 11 bankruptcy protection

Billionaire investor Carl Icahn has received his second blow in three days. Immediately after investors reposed confidence in his bete noir Yahoo CEO Jerry Yang, (See: Yahoo board wins vote of confidence) notwithstanding the recent bonhomie between the two, his homebuilding company WCI Communities became the latest casualty of the housing market crisis yesterday, filing for Chapter 11 bankruptcy protection after it failed to get additional financing in the face of massive losses.

Icahn, chairman of WCI's board, said the filing, which excludes Prudential Florida WCI Realty and the WCI Mortgage business, was necessary, in spite of several efforts to prevent such an occurrence.

"The company, with all diligence, has attempted to avoid a bankruptcy filing. However, the filing became necessary because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default. This was confirmed when certain holders of the company's $125 million convertible notes informed the company that they rejected its exchange offer and instead insisted on being paid in cash in full on August 5, 2008,'' he said.

The company also dismissed CEO Jerry L Starkey and replaced him on an interim basis with David L Fry. Starkey, who had been at the helm of company affairs since 2005, agreed upon a severance package with WCI. Fry had joined WCI in 1995 and was appointed as chief operating officer in November 2007. In addition to his new responsibilities, he will continue to be responsible for WCI's operations nationwide.

WCI and about 130 of its subsidiaries filed petitions to restructure their debt and capital. Companies that file for protection under Chapter 11 of the US Bankruptcy Code seek a court order to prevent creditors from immediately seizing the company's assets.

WCI was founded in 1946 as Coral Ridge Properties which evolved into a division of the old Westinghouse Electric Corp. In 2002, WCI Communities, Inc. issued an initial public offering and became a publicly-traded company on the New York Stock Exchange, trading under the symbol: WCI.