Current news for this company:
Standard Pacific Homes - Residential
The Irvine-CA based Standard Pacific Homes, the subject of bankrupcy rumors throughout 2007, is still scraping along. However, their full-year 2007 results (announced Feb. 4) leave little room for comfort, as the company lost $767M for the year, as compared with a gain of $123M in 2006. More on the nature of the losses from the linked article:
Pretty grim. But there's more:
In the fourth quarter, the company's gross margins from its home building operations were negative 17 percent. During that quarter, the company was not in compliance with tangible net worth covenants for its $900 million revolving credit, and two term loans totaling $325 million. It has received a waiver of those covenants from its banks that extends through March 31.
To us—and apparently S&P—all this suggests a worsening rather than improving situation, but sure enough, some analysts disagree (perhaps they are comforted by the $235M tax refund all these losses will generate in 2008). We wonder what exactly the cash cow is going to be with the core business (building and selling homes) having switched to a money-loser. Given that, cash flow is currently coming from sales of JVs and other assets—at steep discounts, to boot. While the company may be able to stay afloat for a while on that plan, by definition it means continual hits to shareholder equity.
An improvement of SPF's trajectory seems like it would require the market to bounce back soon. Otherwise, in an environment of rising costs and falling home prices, we are at a loss to figure where SPF is going to generate profits from. In light of that harsh reality, creditors may not be willing to waive SPF's debt covenants next time around.
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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.