Houston Chronicle- A group of hedge funds is fighting to unravel Tousa Inc.s’ July 2007 refinancing, saying that would allow the homebuilder to pay unsecured creditors of its subsidiaries in full.

The investor group, which holds nearly a quarter of Tousa’s $1 billion in unsecured notes, contend the company "forced" its subsidiaries to guarantee first- and second-lien loans to refinance $675 million in debt it racked up by buying the homebuilding assets of Transeastern Properties Inc.

The "disastrous" refinancing, the investors said, unnecessarily saddled the subsidiaries with $500 million in new debt. In papers filed with the U.S. Bankruptcy Court in Fort Lauderdale on Wednesday, they said the refinancing rendered Tousa and its units insolvent.

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