Bankruptcy Looks Imminent for Florida Builder WCI Communities
The Palm Coast, Florida developer of Hammock Dunes condominiums is in default on several loan agreements.
Palm Coast, Florida – August 1, 2008 – What a difference a year makes. Last year, WCI Communities turned down a tender offer of $22 per share for the company. The company recently reported a net loss of $100.2 million for the quarter ended June 30. Further, it reports that it is in default of several loan agreements. WCI shares closed yesterday at $1.18.
Already in a cash bind compounded by its inability to pay a $125 million convertible bond due August 5, 2008, WCI announced in a regulatory filing Tuesday that it is in default on its revolving credit facility, term loan, and apartment construction loan agreements totaling $758.4 million. Lenders appraising WCI’s properties are finding some worth less than their book value, further limiting borrowing options. If WCI is unsuccessful restructuring the loans or raising the cash to pay them, it will likely be forced into bankruptcy soon.
The story is filled with irony. Multi-billionaire Carl Icahn owns 14.5% of WCI. In May 2007, Icahn tendered $22 per share for the remaining shares. In a letter to shareholders, the then current board urged rejection of the Icahn offer. Icahn failed in his bid to buy the rest of the company, but was elected to the Board of Directors and serves as its current Chairman.
Excerpts from the Board’s letter to shareholders include:
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"Your Board believes that other offers or alternatives to the Icahn Group’s offer could emerge that would provide shareholders with greater value than the current $22.00 per share conditional offer of the Icahn Group."
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"The Icahn Group’s tender offer is inadequate and not in the best interests of WCI and its shareholders."
WCI Communities was named America’s Best Builder in 2004 by the National Association of Home Builders and Builder Magazine. WCI developed condominiums in the Palm Coast area private community of Hammock Dunes (Northeast Florida) where it still has unsold inventory, including approximately 30 condominium units and land entitled for condominium development.
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