What is SPF's plan????
The only fact in evidence on March 21 regarding the departure to retirement of Stephen J. Scarborough from the CEO post at Standard Pacific Corp. (NYSE:SPF) on March 20, and his replacement with independent director Jeffrey V. Peterson, was that the move was sudden....
The fear of many investors in the company's common stock was evident in a question regarding whether the company was considering filing for bankruptcy protection, asked during a hastily arranged conference call with the company's new management team. Peterson responded, "I don't think it's appropriate to comment on that at this time on this call."
Standard Pacific is among the most heavily leveraged public companies in the home-building space, with a debt-to-backlog ratio of nearly 6 to 1..."We have been unable to maintain compliance with the financial covenants contained in our debt instruments.".
It also has significant, off-balance sheet exposure to joint ventures; it is the second among the big public building companies. ...in 2005, when the company partnered with St. Paul Insurance and IHP in the 1,240- acre Black Mountain Ranch project in San Diego.
In 2005, Big Builder reported on the unusual structure of the Black Mountain Ranch deal: The hitch was that St. Paul wanted to continue to be an investor after it sold the property and also required rather unorthodox payment terms that entailed letters of credit for six years. "Other builders thought those terms were unwieldy, but Standard Pacific saw an enormous opportunity," said Doug Neff of IHP Capital Partners.
SPF lost hundreds of millions of dollars last year. It is running out of cash and owes billions. It is now being forced to spend millions on its Black Mountain Ranch development. The other builders in the development are financially strapped. Although in the public presentations SPF identifies the limited dollars invested in the community thus far, it failed to provide the amount it will be required to spend to build out guaranteed by millions and millions in letters of credit. These letters of credit are in guaranteed by the revolver lenders IN ADDITION to the amount outstanding on the revolver.
Take a look at these spec houses SPF's has just started to build that won't be completed until the end of Summer. Who in their right mind would be buidling so many spec houses in this environment?
And S&P forecasts that house prices in SPF's communities will not decline in 2008 and recommending a $7.50 price target? Didn't S&P just forecast that house prices will continue to decline. Is S&P the same company as S&P?
With cash draining quickly, losing hundreds of millions of dollars per year, HUGE obligations to keep spending building out communities, owing billions to creditors, JVs blowing up everywhere, owing vendors millions, paying executives large salaries, bunuses and severence packages, and liquidating inventory at pennies on the dollar, what has SPF's plan been for the past year?
To hose shareholders and creditors and pay management wonderful compensation packages including bonuses?