Housing
WCI Raises Black Flag, Skull & Crossbones (WCI)
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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
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