24/7 Wall St. » WCI

WCI Raises Black Flag, Skull & Crossbones (WCI)

247wallst — Mon, 04 Aug 2008 09:06:57 +0000

We have yet to see public homebuilders file for Chapter 11 bankruptcy protection. WCI Communities Inc. (NYSE: WCI) is the first of the former large homebuilders to file for bankruptcy protection. The homebuilder has noted that some 130 of its subsidiaries have filed petitions to restructure their debt and capital. Guess who its Chairman is… CARL ICAHN.

Icahn said the company has tried to avert this filing but recentfailure to obtain financing and the realization of the $1.8 Billion indebt soon to be in default are the primary reasons. Convertible noteholders (of $125 million) rejected an exchange offer for common stockand demanded cash effective August 5, 2008. CEO Jerry Starkey is alsoleaving the company and David Fry has been appointed interim President& CEO.

What is interesting about WCI is that this has been one of the "mostat-risk" of all the public homebuilder stocks. Carl Icahn at one pointsaid that bankruptcy was not an assured outcome on a CNBC interview andthat caused a sharp rally in this stock at the time and Jim Cramernoted this as well earlier this year as one to watch based upon Carl Icahn. In retrospect, that will be referred as the sucker bet.

As a reminder, Billionaires involved in companies are probably going tolook out for themselves first. If that isn’t the case, that’s at leastwhat shareholders may think.

Jon C. Ogg
August 4, 2008

Many Homebuilders Up 100% From Lows (MTH, PHM, LEN, WCI, SPF, HOV, XHB)

247wallst — Thu, 31 Jan 2008 14:34:26 +0000

Everyone knew homebuilders would turn one day and when they turned it would be fast and in a flurry of buying volume. Much of this may attributed to short covering, but much is because the good old Fed and another 125 basis points in rate cuts within a 10-day period. You know you can’t pay attention to the headlines on home sales or even the earnings out of these, because that is dismal. But traders are taking aim here. In fact some of these are up 100% off of lows already.

Meritage Homes (NYSE: MTH) up 12% at $15.26, up over 100% from lows; 52-week range $7.04 to $46.65.
Pulte Homes (NYSE: PHM) up 14% at $15.52, up over 80% from lows; 52-week range $8.20 to $35.56.
Lennar (NYSE: LEN) up 8% at $19.70, up over 60% from lows; 52-week range $11.98 to $56.54.
WCI Communities (NYSE: WCI) up 14.5% at $5.98, up over 200% from lows; 52-week range $1.35 to $24.20.
Standard Pacific Corp. (NYSE: SPF) up 22% at $3.78, up over 100% from lows; 52-week range $1.47 to $30.52
Hovnanian Enterprises Inc. (NYSE: HOV) up 10% at $9.68, up over 100% from lows; 52-week range $4.25 to $37.58.

We even ran the key ETF for the sector. The SPDR S&P Homebuilders (AMEX: XHB) is up over 8% today to $22.10. But even this is up almost 50% from the recent lows; 52-week trading range $15.22 to $40.03. That low was just on January 9, 2008.

There are many other names that were equally charged. But these were the ones that fir the screen today.

Jon C. Ogg
January 31, 2008

Will One Of The Home Builders Go Bankrupt? (DHI)(HOV)(BZH)(PHM)

247wallst — Sun, 07 Oct 2007 17:52:40 +0000

The housing situation in the US may be getting bad enough so that one or more of the major home builders could face Chapter 11, especially if the downturn goes deep into 2008.

Bloomberg writes that "at least five of the top 15 homebuilders by revenue are burdened with too much debt, Agency Trading’s Barron said. They are Hovnanian (HOV), California-based Standard Pacific(SPF), WCI (WCI), Beazer Homes (BZH), and TOUSA Inc (TOA)."

“We would not be surprised to see one or more of the larger homebuilders become insolvent if current pricing trends persist into 2008,” Mark A. Morgan, senior equity financial analyst with New York-based Rochdale Securities LLC. Some media reports already indicate that several of these companies are in negotiations with their banks to improve payment terms on debt.

But, banks may not be able to help the larger homebuilders, especially in a market where investors are watching the banks themselves. Huge write-offs at Citicorp (C) and other big US financial companies have put pressure on managements at the firms to be more prudent.

If share price fall-off is any indication, Beazer and Standard Pacific are the most likely homebuilders to file for bankruptcy. While shares in most of the larger companies in the sector are off about 40% over the last year, shares in these two firms are down closer to 80%.

If one company files for Chapter 11, does it cause a huge shareholder stampede out of all of the others? Probably. Which means by early 2008 stocks in all of these companies could all be down by 80% from their late 2006 peaks.

Douglas A. McIntyre