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alstry (< 20)

Is SPF worth ZERO?



March 05, 2008 – Comments (6)

At the end of last year, SPF reported to its shareholders that its bookvalue was $994 million dollars.  Now folks, is that really honest behavior from a company whose CEO and CFO are defandants in a class action suit for providing false and/or misleading guidance?

On its books SPF represents that its land holdings are worth North of $1 Billion dollars.  Much of that land is located in FL and CA hasn't even been impaired yet.  We KNOW that finished lots have been selling for $0.30 cents on the dollar post impairment and still declining.  Heck in Florida, some are selling for less than $0.10 in Fort Meyers area.

Let's be charitable and only wipe out an estimated $600 million of book. 

Then a material amount SPF's homes under construction are simply not much beyond a finished lot.  It is likely that SPF will have to take a 20% haircut there to simply bring WIP to current market value.  There goes another potential $200 million (very possible could be even more)?

In addition, SPF lists on its books $293 million for investments in Joint Ventures.  Those are very levereged investments primarily in land.  It is very unlikely that those investments have any net value after debt.  There goes another possible $300 million?

SPF still has the audacity to keep $35 millionGoodwill on the books in this market?  Amazing.  We can keep it there simply for rewarding effort.

Now, here is where it gets interesting.  SPF has about $700 million of recourse JV debt of which $400 million is subject to remargin liability.  Must of that debt is secured by land that may not be worth what it is currently booked at.  Let's just shave off another potential $300 million to be conservative.

Not only that, SPF is obligated to take down a bunch of land in 2008 at above current market prices that we don't even need to include.  Oh did we mention that SPF still keeps about $140 million of deferred assets on the books but maybe that still has a value so let's keep it there.

Just a quick analysis using  the above wipes out $1.4 billion of SPF's $994 million of bookvalue.  Does that equal zero?

And Wall Street analysts upgraded this company just a few weeks ago?  We do live in crazy times my friends.


6 Comments – Post Your Own

#1) On March 05, 2008 at 4:52 PM, cabuilderboy (84.28) wrote:

I don't know what SPF ever did to you, but it must have been bad based on your prior posts (that was a joke). You may very well be right, but it is all about cash flow right now. They have cash, and for a little while, it appears they can keep the lights on. If thier backlog doesn't improve during the spring buying season, you may get your insolvency declaration later this year.

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#2) On March 05, 2008 at 5:06 PM, alstry (< 20) wrote:

It used to be about cash flow.  Now it is about debt and dirt and cash.  If you can reduce your operatioins to dirt and cash, you can rope a dope and wait this tsunami out.

If you are reduced to debt and dirt, you are basically hosed because there is little possibilty to generate cash.

Now that banks are getting tighter than an uptight vigin, expectations are being adjusted.

I am not aware of a single public builder in the United States that has more relative debt to less relative assets than SPF. 

How long do you think there bankers will let them continue to lose hundreds of millions per quarter before cutting them off.  What about the trustees for the senior debt holders?  Especially for a mangement team giving themselves millions in bonuses.

So far they got three waivers from their bankers, as much as any builder....there goes my three strikes baseball analogy.  Are four fouls an out?

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#3) On March 05, 2008 at 6:12 PM, EScroogeJr (< 20) wrote:

I would presume SPF is fire-selling houses in a community near where astry lives, and this has materially impaired alstry's ATM machine :)

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#4) On March 05, 2008 at 8:40 PM, alstry (< 20) wrote:


In the end, it comes down to what are SPF's assets really worth? 

Between consolidated and JV, SPF reports about $4 Billion worth of homebuilding assets against over $3 Billion of debt.  Most of the assets are CA and FL land.  If those assets are really worth $0.50 cents on the dollar to what SPF management is representing to the world, where does that put this company?

We will see.

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#5) On March 05, 2008 at 9:49 PM, EScroogeJr (< 20) wrote:

Just glanced over the financials. I'd say, 60% chance of BK and 40% chance of survival. The land on the books is overvalued by 30%, IMHO.

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#6) On March 06, 2008 at 1:27 AM, DemonDoug (31.36) wrote:

my geiger counter BS meter is going off the scale in regards to comment #1.

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