Bankruptcy?

NEW YORK, Feb 10 (Reuters) - A review of the 33 U.S. home builders generating more than $10 million in revenue found that more than 30 percent are in danger of filing for bankruptcy, according to a restructuring consultancy.

"It's striking when you see just how much cash flow has continued to decline for the better builders," said John Bittner, partner at Grant Thornton Corporate Advisory and Restructuring Services.

Already this year, several home builders have filed for bankruptcy, including Florida's Mercedes Homes Inc, which filed on Jan. 26, citing the collapse in demand for new homes and an oversupply of existing homes for sale. The company called itself the No. 20 home builder in the United States and their operations were spread throughout 13 markets.

Fulton Homes Corp also filed for Chapter 11 bankruptcy protection this year in Arizona, while Landmark Homes and Development Inc filed in Nevada.

To avoid the same fate, the survivors have, and continue to, cut costs and prices and ramp up incentives on inventory in order to increase cash flow at the expense of profitability.

Expense reduction will be critical, said Tim Skillman, a Grant Thornton principal.

Average revenue per home builder declined nearly 50 percent from peak levels to $1.9 million last year. Home builders that slash land spending and maximize cash flow will help themselves combat the specter of distress, the firm said.

But there is a limit to how much builders can cut costs and sell off assets, said Bittner.

"It'll get to a point when builders get rid of the assets with the most value and expenses can't be cut much further. After that, there's not much they can do except wait for a turnaround in the housing market."