What Does SPF's Management KNOW?
They gave themselves millions in bonuses in February after losing hundreds of millions last year and currently in violation of their loan covenants.
SPF's S-3 indicated the following:
For the year ended December 31, 2007, our earnings were insufficient to cover fixed charges; the amount of additional earnings needed to cover fixed charges for such period was $655.3 million.
At the recent Wachovia conference, Management seemingly indicated that they expected to recover all NOL carrybacks this year implying that they expected to lose hundreds of millions more this year.
SPF has until March 30th to renegotiate their revolver covenants. Banks are getting tighter and tighter with lending. The company lost hundreds of millions last year. It could very well lose even more this year as conditions deteriorate. For a company with very limited cash and hundreds of millions of spend obligations through Off Balance Sheet Joint ventures, land take down requirements secured by letters of credit, and SGA, why would a lender extend additional credit to a business that seemingly has little chance of paying the debt back?
What conversations did management have with their lenders at the end of December? Do they already have a pretty good idea what is going to happen at the end of March? Why would they give themselves millions in bonuses having such a poor outlook for the current year? After all wasn't it this management that borrowed billions to speculate on land in currently some of the most challenged markets in the country?
All seemingly logical questions......anyone have an answer?