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Cardinal Homes restructures under Chapter 11 with plans for fresh capital, resurgence

SoVaNow.com / January 29, 2020
Charlotte County-based Cardinal Homes is restructuring after the privately-owned builder of modular housing units filed for bankruptcy protection in December in U.S. Bankruptcy Court for the Eastern District of Virginia.

Cardinal Homes President Bret Berneche said the company “is currently in a sale process known as a Section 363 Sale under Chapter 11 of the United States Bankruptcy Code and is moving toward a sale to a new owner.” He expects Cardinal Homes “to emerge from this process well capitalized and able to rebuild to pre-recession capabilities.”

Berneche said the proposed buyer has already provided substantial financing to enable the Wylliesburg plant to continue operations and complete current orders during the restructuring process. Additionally, the bankruptcy court has approved a plan for the company to shed some of its existing debt through the sale of assets, Berneche said.

The bankruptcy filing lists assets at less than $10 million, liabilities at less than $10 million, and creditors at between 200 and 999. Cardinal potentially owes its 20 largest unsecured creditors nearly $7 million, though some of that debt is disputed.

Berneche said he expects the sale to be completed in the latter half of February after which, the company will be poised to take full advantage of its planned ongoing economic recovery.

“Cardinal has a large order book and expects to hire a large number of employees and rebuild operations, once the sale process is complete,” Berneche said.

Cardinal Homes has been a fixture in Charlotte County since April 1970 when the company was founded by Donald Cappaert in the midst of a long building boom that began after World War II. Soldiers returning home from the war effort were looking for inexpensive houses for them and their families. Traditional builders were unable to meet the demand, and this gave rise to the modular home market.

Modular housing is manufactured and assembled in a plant and shipped to its site. It differs from mobile homes because it must meet the same building-code standards as houses built on site, or stick-built housing.

The Berneche family purchased the company from Cappaert in 1992, and moved away from the early cookie-cutter homes. Over the years they also expanded operations and built a new factory in 2006, outfitted with overhead cranes that had the capacity to lift several tons. This allowed larger modules to be constructed. Not only did the size of modular homes greatly increase, but also the customization options.

Today, Cardinal Homes builds ranch, colonial, Cape Cod, and contemporary style modular homes designed by custom architects using assembly line efficiency in its factory.

Cardinal Homes continued to operate during the housing bust and economic downturn of the Great Recession that began in 2008, with the financial support of the Charlotte County IDA and a grant from the Tobacco Region Revitalization Commission. In 2013, the Berneche family turned to an outside investor to help in the company’s recovery efforts.

The move helped the company survive, but ultimately the family felt it hindered the company’s post-recession recovery. In 2016 Bret Berneche and wife Dorothy repurchased the shares of their investor-partner and announced that they would refocus the company on a growth plan developed prior to the economic collapse.

At its peak, Cardinal Homes employed around 265 carpenters and electricians. Today Berneche said Cardinal Homes has 56 active employees with plans to add more.



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