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alstry (35.49)

S&P Misleading Investors????

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March 25, 2008 – Comments (7)

SPF recently disclosed it only had $293 million of cash left.  It has over $750 million of debt repayments, interest payments, land take down requirements, and JV remargin liability.  SPF is liquidating assets rapidly and its very possible that the current market value of its assets does not equal its outstanding debt.  It is currently losing hundreds of millions of dollars and the outlook is deteriorating.

It just unexpectedly replaced its CEO and appointed a new one with NO homebuilding experience.  The recently released CEO and the current CFO are being sued in a class action suit alleging providing misleading guidance.  The business is currently cash flow negative and it has the second largest exposure to JV liability of any publicly traded homebuilider.  Ironicly, the new CEO's name is JV Peterson.

With only $293 million of cash, rapidly dwindling assets, billions in debt, HUGE expenses ahead, and losing millions every week, S&P states the following:

3/24/2008  S&P MAINTAINS HOLD OPINION ON SHARES OF STANDARD PACIFIC (SPF 4.93***): With SPF getting an extension of a waiver of non-compliance with its credit facility, lowered from $900M to $700M, and holding$293M in cash on hand at Mar. 21, we believe it has a betterchance of surviving the severe housing downturn. SPF also appointed a new CEO from its director ranks last week. We believe SPF's high lot inventories in Cal. will become attractive when the housing market turns around. Applying aprice-to-book slightly below 0.5X to a forward book value of $14.75, in line with small builders, we are maintaining our 12-month target price at $7. /K. Leon-CPA

'Better chance of surviving the housing downturn'???? SPF has violated its covenants 4X and is begging for a 5th waiver.  Who is this guy trying to deceive??? Only $293 million in cash and hundreds of millions more in spend obligations about to be shoved down its throat.....

"We believe SPF's high lot inventories in Cal. will become attractive when the  housing market turns around"?????????????????????  WTF?  CA is one of the most challenged markets in the country in terms of foreclosures and price declines.  S&P's own experts don't expect a turnaround for a long time.  SPF would  be lucky to get $0.15 cents on the dollar for its CA land if PHM's recent Sacramento land sale was any indication of current value.

"12 month price target of $7"?  You gotta be kidding.......is that before or after bankruptcy which some are speculating could be very very soon due to recent JV deterioration?

This anlayst should be called to task immediately for such a negligent/misleading report.  Who analyzes the analysts?  Does SPF pay S&P for the reports?  Is there a conflict of interest?  Why would an analyst write such a report that seems so contrary to open and obvious evidence?

Is S&P's work on SPF reflective of the quality of its overall analysis?

 

See Demon, I spread out the ranting beyond that housing honey Ivy Zellicous Zellman.

 

 

7 Comments – Post Your Own

#1) On March 25, 2008 at 11:17 PM, alstry (35.49) wrote:

MORE FUN WITH S&P!!!!!!!!!!!!!!!!

From their report:

"Assuming stable pricing in its major markets, we foresee the company's gross  margin at 8.8% in2008, compared to a negative 7% in 2007."

Has anyone told these idiots that prices are crashing in CA faster than just about anywhere else in the country??????

."..backlog at $532M, one half of '06's level, we see an 8% sales decline in '08" 

Actually, backlog was down over 50%, lower spec count, the sales environment is slowing, and prices are crashing...................and these guys are guiding only 8% sales decline.  And some people are suing Parnes and Scarborough for providing misleading guidance????

Does S&P have any credibility left?  No wonder it rated toxic junk as AAA.....when up is down and left is right, who cares if AAA is junkyard delight.

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#2) On March 25, 2008 at 11:37 PM, EScroogeJr (< 20) wrote:

I see big potential in SPF if it survives this year, this is all I can say.

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#3) On March 26, 2008 at 3:26 AM, DemonDoug (98.85) wrote:

Alstry, my point is that I want to see a two-way conversation.  S&P is not going to respond to a CAPS blog and neither is Ivy Zelman.  I want to see a back-and-forth give and take, because like I said, if anything I'm more bearish than you, I feel that all but 3 homebuilders not only should go bankrupt but would be bankrupt right now if we had truly free and fair markets.  Have you seen what OHB has done recently?  Up 15% on another bonus analyst upgrade?  Their ttm eps is -6.81.  If i had a -6.81 they arrest me, take all my life savings, throw me in jail, and probably stick things where the sun wouldn't shine.

What I want to see is your ranting to actually reach these shills and have a back-and-forth, in the slim hopes the market might actually wake up to the fact that these businesses are shams.  Bent had it completely right with his hundreds of enrons article... the entire HB industry is just one big Enron.

S&P has credibility for 2 reasons:

Case/Shiller Index

S&P 500 index which we measure all returns against.  Beyond that I wouldn't trust them any furhter than i could throw the building they are headquartered in. 

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#4) On March 26, 2008 at 7:48 AM, dwot (99.49) wrote:

Good post.  So, now we wait.  As soon as the banks holding their debt get hit by the FDIC their hand will be forced.

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#5) On March 26, 2008 at 9:06 AM, alstry (35.49) wrote:

Demon,

The reason I don't contact the analyst's directly is because they KNOW what they are doing.  There is nothing I can say to change their deception.  These people are professional trained analysts.  A home builder is one of the easiest businesses to analyze.  If one of the analysts had a different perspective, that would be one thing......but they all have the same perspective and they are all WRONG.

Just look at the above analysis, how hard is it to see.  S&P has systmatically lowered its price target for the past year from 35 to 30, to 20, to 10 and now to 7?

What does that say to you?  Any dialogue will be had with other like minded people outside the "system."  When this is over, we will likely look back and ask ourselves.....how did we let this happen?

Scarborough just got a generous severence to leave and the new CEO who has no homebuilding experience will receive a salary of $850K plus who knows what benefits.  This is for a homebuilder dumping its employees left and right and begging for forgiveness on its debt covenants for a FIFTH time.

Something very serious is about to be unleashed upon us....be prepared.

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#6) On March 26, 2008 at 9:10 AM, devoish (98.81) wrote:

DD,

You, Alstry. Dwot, Bent, Escrooge, Fbldr and many others make this discussion a two way street. Otherwise it is just one-way from S&P, CNN arguing pump side vs. extreme pump side. Ivy will get another chance on CNN, but I will be here.

Thanks.

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#7) On March 26, 2008 at 11:19 AM, floridabuilder2 (99.63) wrote:

i agree with devoish.......  what the mainstream media doesn't understand is that bloggers not just here but all across internet-dom provide us the real information about what is going on in the world.......  i feel bad for people that don't know how to use the internet and rely on CNBC and the mainstream press for investment advice

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