FloridaBuilder/Alstry Race Almost Over
As our horses, FB's WCI and Alstry's SPF, approach the finish line, FB gains new confidence as he just green thumbed SPF!!! Based on FB's history, I should just go out on the track right now and shoot my horse.
I gotta say his baby WCI has serious issues and looks like a strong contender to win. How can anyone sell a luxury condo in Florida these days......but between you and I, it ain't much different selling a house in overbuilt CA either when the majority of the sales are foreclosures. Just look at my previous blog.
As I look at SPF, it seems clear why its CEO jumped ship a few months ago.
They ended the quarter with only $328 million in cash and in violation of their revolver and public debt covenants preventing them from borrowing any more money. Furthermore, they had very few specs left to liquidate and most backlog homes scheduled for delivery in the Fall and Winter(lots of $$$ to spend and none coming in for a while-subject to cancellation).
Soon after the quarter ended, SPF spent $39 million unwinding a JV and added $45 million of additional debt. Then they had $69 million of payables that was likely extinguished by the end of April bringing cash balance down to about $220 million(absent receipts). Don't forget this company has a lot of debt and overhead conservatively estimating a SGA and P&I spend of approximately $50 million through May taking balance down to $170 milliion plus any spend for buildout against any receipts for closings.
Then in Mid May SPF got a reprieve from their revolver lenders and were told they could borrow an extra $70 million but only on a secured basis. The problem is that much of that $70 million potentially went to unwinding a few more JVs last week based on what the CFO said on the CC with the carve out provision against the limitations set by the public debt holders.
Here is the big problem SPF faces, it has very limited borrowing ability and very little revenues coming in over the next four or five months. However, it has probably well over $500 million dollars of spend requirements to build out backlog, land takedown requirements, SGA and P&I payments over the same period of time.
With probably less than $200 million in the bank as this post is written, little cash coming in, very limited borrowing ability, and its mortgage facilties cut off on May 1st, SPF facing over $500 millioin of spend ahead is seemingly rapidly approaching the end of the rope.
The most interesting question for me right now is how low are SPF's revenues during Q2. With only $500 million of backlog(the vast majority of which is likely scheduled for delivery after August 1st) and only 550 completed specs most of which are in lower priced markets of Carolina, Texas, and Colorado(a Max of $125MM), my estimates for Q2 revenues are between $125 million and $175 million....depending on how many specs they liquidate. In looking at their website, it doesn't appear many were liquidated since April 1st tilting my estimates to the lower end of the range. What is so strange is that right now current analyst estimates are for revenues is $427 million. According to Thompson, not a single analyst has changed come out with a revision since the earnings report last week.
With probably less than $200 million in the bank, its borrowing ability cut off, its mortgage facilitiy cut off on May 1st, and facing well OVER $500 million of spend in the next few months, it seems clear that SPF is coming to the end of its rope. Now the question is whose rope is longer, Alstry's or FloridaBuilder's.