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alstry (35.36)

SPF mgt admits capital limited????

Recs

11

May 22, 2008 – Comments (6)

Excepts from SPF's 10Q: 

However, we have been unable to maintain compliance with the financial covenants contained in our revolving credit facility and two term loans and, as of March 31, 2008, were unable to satisfy the conditions contained in our senior and senior subordinated public notes that permit us to incur additional indebtedness (other than specified categories of additional indebtedness) and to make restricted payments (including payments to satisfy joint venture obligations). As a result, and as discussed more particularly below, our sources of capital are currently limited and could become inadequate to meet our liquidity needs.

NOT ONLY IS CAPITAL LIMITED....BUT THEY DON'T THINK THEY CAN COME INTO COMPLIANCE BY AUGUST 14TH...

We anticipate that the financial ratios contained in the Credit Facilities will continue to be negatively impacted by deteriorating market conditions, which, over the last two years, have caused us to incur (including discontinued operations) pretax inventory, joint venture and goodwill impairments and land deposit write-offs totaling $1,655.6 million and expect that we will require additional covenant relief from our bank group following expiration of the Proposed Waiver Extension on August 14, 2008 if we are going to avoid future noncompliance with these covenants.

MANAGEMENT ADMITS SOURCES OF LIQUIDITY LIMITED BASED ON CURRENT FINANCIAL CONDITION

Based on current market conditions and our financial condition (including, most importantly, our inability to satisfy the conditions contained in our public note indentures that are required to be satisfied to permit us to incur additional indebtedness and our inability to maintain compliance with the financial covenants contained in our Credit Facilities), our ability to effectively access these liquidity sources is significantly limited.

ONLY ENOUGH LIQUIDITY FOR SHORT TERM NEEDS

Assuming that our bank group approves the Proposed Waiver Extension{WHICH WE KNOW THEY DID}, we believe that these exceptions and our cash balance of $328.8 million at March 31, 2008 provide us with substantial resources and alternatives to fund our short-term cash needs.

IF THINGS DON'T IMPROVE, WE MAY FORCED TO DECLARE BK

As a result of these uncertainties, and to help position the Company to weather the current market downturn and to be prepared to take advantage of market opportunities when the market strengthens, our Board of Directors has initiated a process to examine alternative financial and strategic opportunities available to us to provide the Company with possible additional liquidity and operating flexibility. These alternatives may include the sale of equity or debt securities, debt exchanges, the sale of additional non-core assets, or a merger, business combination or sale of the Company. This process may not result in any prospective transaction, or any specific type of transaction, and our Board of Directors may determine that any prospective transaction is not in the best interests of the Company.

THE RACE BETWEEN ALSTRY AND FLORIDABUILDER IS NOW NECK AND NECK.  IT IS COMING DOWN TO THE WIRE.  THE CAMARAS ARE READY.  WCI....SPF....WCI.....SPF.............THE CROWD IS SCREAMING......AND FLORIDABUILDER STILL HAS SPF GREEN THUMBED......NOW THAT IS CONFIDENCE!!!!!!

 

PS:  please take this competition in the lighthearted nature intended and my chatter as simply pimping FB....if I beat  floridabuilder.....even though I was the 1000 to 1 shot at the beginning and he green thumbed SPF to rub it in my face down the home stretch as I was bleeding all over the track and my leg broken....please take it easy on him as it has been my privelege to be allowed to race the great florida builder.

6 Comments – Post Your Own

#1) On May 22, 2008 at 4:03 PM, alstry (35.36) wrote:

With SPF's lawyers basically admitting in the 10Q that the company is hosed, why would Wall Street Analysts and people as smart as FloridaBuilder recommend to "buy" a homebuilder such as SPF.

Are SPF's lawyers idiots and clueless about what is going on?????

That would be novel....a clueless lawyer.

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#2) On May 22, 2008 at 4:44 PM, cabuilderboy (88.52) wrote:

Not really anything we haven't already known, since their conference call on May 12. I am fairly certian most of the above has been commented on in the Fools, if not in your own blogs as you shamelessly continue to try and generate your own 15 minutes in some type of mythical "clash of the titans". Feel free to pat yourself on the back, but new information would be appreciated. Even after my critique, I still recommended this blog, so don't ge to upset.

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#3) On May 22, 2008 at 4:56 PM, bobbyj0708 (< 20) wrote:

So I can no more analyze a company's balance sheet any more than I can fly a 747 or give birth so I have to look at investing using (hopefully) common sense. SPF raises some questions:

1. If you're sitting on the BOD, why do you pay money to get rid of Scarsborough? I would think you'd do that only to bring in someone who can get what you need, which is cash. So the BOD kicks SS to the curb and brings in the highly touted (by FB) Wall Street dude because he must have a deal lined up that can save the company. But it's been 2 months, hasn't it? So where's the deal? If it hasn't happened yet, I think any prospective deal must have fallen through.

2. FB says land writedowns don't matter because they don't affect cash flow. But if you're a  possible investor, aren't you going to take into account their land holdings (and pretty much the only possible thing of value for a HB) and see if the land is worth what its valued at? I bet investors have looked and have backed away because the value isn't there.

3. FB's kind of talking out the side of his mouth regarding MTH's stock offering and HOV's new debt. He says that because these companies got their deals, SPF can get one too. But then he also said that HOV's deal simply replaces short-term, low interest debt with long-term, high interest debt and MTH was able to sell stock because the pump monkeys had "pumped up the stock like a lifeless sex doll". Well a stock at $2 hardly seems pumped up and who is going to buy long term debt from SPF unless they're serious believers?

So the way I see it, actions speak louder than words and I see no action from SPF. Until they do something positive I wouldn't touch them with a 10 foot pole.

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#4) On May 22, 2008 at 5:09 PM, alstry (35.36) wrote:

CAbuilder,

I am not upset.  And I appreciate your comments whether or not you recommend my post....that said thanks for the recommendation.

Further, my shameless "clash of the titans" was subtlely intended to bring more attention to FB.  He loves the attention and I know how to get it for him.

What kind of new information would you like.  You heard Obra Homes just went down...a 500 home per year builder. 

Actually, this blog was intended to help those understand how to read a 10Q.  Although the contents to overlap some past info, it also  incorporates some very important issues not addressed before such as the board doing what is best for the "company."  This is a key difference from using the words what is best for the "shareholder."

In a liquidity crisis, it may be better for the "company" to declare chapter 11 even though it murders all "shareholders."  Since I think we are all focusing on shareholder issues here on CAPs, vs. debt holder or creditor issues, I think you would agree that is a very important distinction not raised before.

I hope this helps you and others better understand Qs and how seemingly benign legal language can have profound consequences..

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#5) On May 22, 2008 at 5:30 PM, EScroogeJr (< 20) wrote:

"Since I think we are all focusing on shareholder issues here on CAPs, vs. debt holder or creditor issues, I think you would agree that is a very important distinction not raised before."

As far as I understand it, management is supposed to be accountable to shareholders. They cannot legally promote the interests of creditors over the interests of shareholders becuase shareholders are their employer and they are simply hired employees, and nothing but. At least, this is the theory. Then again, if you tell me the practice is different in the case of SPF, I won't be surprised :)

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#6) On May 22, 2008 at 5:45 PM, alstry (35.36) wrote:

Actually, I believe there is case law when management can shift its fiduciary duty from shareholders to creditors after a company becomes insolvent.....but one would think that shareholders would have to be notified if such situation existed.

In the past the courts have held a strong bond on the fiduciary duty of managements and boards to their shareholders....but recently, that bond seems to be eroding but not eroded yet.

In this case, management has never created any inference that such an insolvency condition existed....as a matter of fact, their behavior and public statements have been contrary.

Sorta strange ain't it based on what we know about land values and how little they have impaired their current land holdings. 

My primary concern right now is that FloridaBuilder is not publicly humiliated with his green thumb position.  I will do what I can to protect him....he is too valuble to CAPs.

 

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