Dominion Homes at the Brink of Bankruptcy, Worth a Rescue

Dominion Homes (DHOM) is a small company that makes homes around central Ohio as well as parts of Kentucky. During the housing boom of the 1990s, Dominion aggressively purchased as much land as they could upfront with debt to take advantage of what they foolishly believed would be an everlasting housing boom.

Now I will admit personally that I don’t know everything there is to know about the housing industry, but I do know that it is a cyclical industry. Therefor,e I would say, using that logic, it is extremely foolish to have a balance sheet with hardly any cash, but with tons of land, and a lot of debt. It seems to me that they were asking for bankruptcy many years ago.

Now that I have bashed this company as much as I can, I do believe it can be saved from declaring bankruptcy. If a large investor decided to give the company liquidity, the company could use that cash to pay down its debtm and therefore not be forced to liquidate its land inventory for pennies on the dollar. The company then would be able to weather out the housing bust. The large investor would also make a lot of money, too.

Disclosure: At the time of this post, I do not own any shares of Dominion Homes.

Comments

[billb]

Interesting article, but use a spell checker.

[LukeHappy]

What was the point of this article? It is so simplistic, it is comical.
And what, pray tell, makes you think the "large investor" could make a lot of money. I think it is more likely they would lose their entire investment....and that is why it is NOT going to happen.

[The King]

"Now I will admit personally that I don’t know everything there is to know about" journalism, but to my knowledge those that make it their profession proof read their work. They also tend to take professional profile photo's so the article won't be mistaken as a Myspace blog!

Furthermore, if one would want to produce and article they might want to become familiar with the market and builder. For starters, you don't "make" a home you "build" a new home. These aren't toys, a new home is typically the largest investment individuals or families make in a lifetime.

As for "asking for bankruptcy many years ago," its called risk. Take a poll of the industry and a majority vote will show that risk is important. Yes, the industry is cyclical, but to this point has never before been seen!! There are companies falling left and right throughout Ohio and the entire nation.

As 2008 has just arrived, the market will pick back up. Dominion has the land in which they can sell for operating costs to last until the sun shines again. Those that are capable should buy the land not contribute to Dominion. Why? The best investment one could ever make is to purchase/invest in land. Why? It's simple, THEY'RE NOT MAKING ANY MORE OF IT! In essence, both parties would profit and succeed. Dominion would have operating funds and the investors would receive land that can be valuable today and further down the road. Whether it be Dominion or someone else, that land will not remain untouched!