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UPDATE 2-Tarragon Corp files for Chapter 11 bankruptcy

(Adds background, ARKO detail)

NEW YORK, Jan 12 (Reuters) - Tarragon Corp, a residential real estate developer, has filed for Chapter 11 bankruptcy due to dropping real estate values and slower sales in its homebuilding division, the company said on Monday.

An affiliate of Israel’s ARKO Holdings has committed to a $6.25 million debtor-in-possession financing facility, Tarragon said in a press release.

The company said it has adequate current liquidity and it plans to continue operations as usual while it reorganizes.

New York-based Tarragon’s operations are concentrated in the U.S. Northeast, Florida, Texas and Tennessee. It has both a real estate development division that constructs homes and an investment divison that operates a portfolio of rental apartment communities.

“Based on the discussions we have had with our unsecured note holders and the financial support of ARKO, we expect that we will be able to structure a consensual plan with our creditors structuredto enable Tarragon to preserve the value of its property management and development platforms and maximize any return to creditors,” Chief Executive William Friedman said in a statement.

Upon entering Chapter 11, the company intends to explore further negotiations with ARKO in addition to a possible sale or other restructuring or recapitalization, the company said in a court filing.

Shareholders are expected to receive nothing for their holdings, the company said.

The company filed in U.S. Bankruptcy Court for the District of New Jersey. (Reporting by Chelsea Emery and Helen Chernikoff; editing by John Wallace, Richard Chang)

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