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Beazer Homes USA - Residential
Beazer Homes USA, the Atlanta-based homebuilder, has encountered a number of problems as the housing bubble has burst. From investigations by the SEC to late filing and nearly going into default on their bonds, Beazer has not had an easy road. Below is a round-up of news on Beazer's woes, newest to oldest:
2008-02-01: Beazer Homes announced on February 1 that they "will pull out of five markets: Charlotte, N.C.; Cincinnati and Columbus in Ohio; Columbia, S.C.; and Lexington, Ken.". Further to the article, Beazer is teaming up with the mortgage industry's favorite whipping boy, Bank of America-Bride-to-Be, Countrywide Financial. Per the release:
2008-01-23: Beazer presented at a JPMorgan investment conference. According to their presentation, their year over year closings were down some 24 percent with new home orders dropping by 29 percent according to this article from the AJC. The AJC quoted Beazer CFO Allan Merrill regarding 2008; he said, "Our expectation is that this year is going to be very tough."
The AJC article further updates on expectations regarding financials from Beazer as well as the ongoing investigations:
U.S. recession a "wild card"? That was remotely believable three months ago, but today? Not a chance.
2008-01-12: Mike Drummond of th Charlotte Observer does a nice recap of Beazer Homes. One gem on Beazer's prior denial of any housing "bubble":
Drummond further notes how the Observer found 77 out of 406 home buyers in a Beazer subdivision lost their homes to foreclosure in 2007. Drummond's entire write-up is well worth a read.
2007-11-06: This Bloomberg article details how Beazer would soon be engaging in settlement talks with the Department of Housing regarding investigations by HUD into Beazer mortgage employees violating rules related to HUD's downpayment assistance program. The article further notes that Beazer cut 650 jobs (25% of the workforce) during the month of October and would be suspending the dividend.
2007-11-06: Another Forbes article writes about calls by CTW Investment Group, a shareholder activist group, for Beazer's CEO to be replaced. From the article:
It must be tough being a CEO: when your company does well, you make millions. When your company takes a turn for the worst, well, you make millions then, too!
2007-10-29: Forbes writes on Beazer finally striking a deal with its bondholders to amend the terms of $1.5 billion in debt in order for Beazer to avoid default. Bond agreements contain certain debt covenants that require companies to provide financial reports within so many days after a period end. Beazer had failed to comply with regard to these covenants.
In order to avoid default, Beazer offered a $5 fee per $1,000 bond to all who would agree to new terms, allowing for Beazer to delay financial reporting. Apparently, $5 was not enough -- Beazer ended up having to pay $12.50 per $1,000 in order to get the amendment passed.
The amendment will allow Beazer to delay financial reporting on their 2007 results until May 15, 2008.
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Important: Ailing Builders haven't shut down, but they've suffered significant valuation declines, temporarily halted redemptions, or faced other major business hurdles. Builders on watch may not even have unusual declines relative to peers, but may be posted if it is felt there may be risk of developing a more serious condition in the near future.