South Edge is a joint venture between KB Home Nevada Inc, other unrelated homebuilders and a third-party property management firm.
In December 2010, some of South Edge's lenders, including JPMorgan Chase Bank, Wells Fargo Bank and Credit Agricole Corporate and Investment Bank, filed a Chapter 11 involuntary bankruptcy petition against it.
On February 3, the court denied South Edge's motions to dismiss the petition, and entered an order for relief and for the appointment of a trustee.
KB Home expects that a demand will be made under a limited several guaranty that it provided to the lenders.
If the repayment guaranty is enforced, it would have to pay $180 million and a significant amount for accrued and unpaid interest and attorneys' fees, KB Home said in a filing.
The company said it would contest the demand and an unfavorable outcome would adversely affect its financial position and results of operations.
(Reporting by A. Ananthalakshmi in Bangalore; Editing by Joyjeet Das)