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Homebuilder WCI Prepares For Other Options
WCI president and chief executive Jerry Starkey said the company experienced a dramatic drop in new orders in the Northeast and Mid-Atlantic states.
June 16, 2008
WCI Communities said it has formed a special committee of its board in order to review alternative restructuring proposals that it might receive from potential investors.
The formation of the special committee of disinterested members, which includes committee chairman Don E. Ackerman, Charles Cobb, Jr., Hilliard Eure, III, and Jonathan Macey, follows the Bonita Springs, Fla.-based homebuilder’s previously announced hiring of Lazard Freres to oversee its restructuring effort.
WCI sells homes for first-time home buyers, retirees and second-home buyers in Connecticut, Florida, Maryland, New York, New Jersey and Virginia. The business, which announced the formation of the special committee late Friday, said it is seeking to address its 4% contingent convertible senior subordinated notes due 2023.
In May, WCI reported a net loss of $84.1 million for the first quarter, compared with a net loss of $15.8 million for the first quarter of 2007. It also reported a 59.5% revenue decline, to $137.1 million for the first quarter from its first quarter 2007 sales of $338.2 million.
WCI president and chief executive Jerry Starkey said the company experienced a dramatic drop in new orders in the Northeast and Mid-Atlantic states. For instance, the company reported its aggregate number of net new orders declined by 22.8% to 183 as contract cancellations and defaults at closing occurred at higher than long-term historical rates.
“Beyond the seasonal lift in Florida, there are no signs that demand has firmed --many potential purchasers continue to sit on the sidelines afraid of falling prices and the direction of the economy,” Starkey said on May 7. “Our primary focus continues to be on reducing costs and generating cash to pay down debt.”
When WCI released its quarterly results in May, the company reported it had $192.4 million of available commitments under its senior secured credit facility.
Like other home builders WCI has wrestled with the housing market crunch. Its stock has slid from a high of $20.44 per share to a low of $1.35 a share over the past year.
WCI is also the target of a class action lawsuit filed earlier this month on behalf of plaintiffs that purchased one or more of the 239 hotel condominium units at The Resort at Singer Island in the last three years. The complaint alleges that WCI failed to register a public offering of the hotel units with the Securities and Exchange Commission.
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