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A Home Builder Led by Icahn Files for Bankruptcy Protection
The home builder WCI Communities has filed for Chapter 11 bankruptcy protection after failing to obtain financing to stay afloat, its chairman, Carl C. Icahn, said on Monday. Mr. Icahn owns about 15 percent of the company, or about six million shares. On Monday, WCI’s stock lost nearly all its value, closing at 2 cents a share after opening at 99 cents. It was a far cry from the $22 a share that Mr. Icahn offered for the company in March 2007; he bought his stake in WCI in early 2007 for about $19 a share. The company rejected his offer, and took itself off the market. Mr. Icahn was named chairman after a protracted proxy battle. At the time he was elected chairman, Mr. Icahn said: “Despite the rough road ahead, I believe in the long-term value of the company and view the WCI platform as a unique vehicle to take advantage of the current market disarray.” The luxury builder, whose business is concentrated in Florida, one of the states hardest hit by the housing downturn, defaulted on its bank debt on July 29 when its liquidity levels fell below the threshold required by its lenders. “The banks have had enough, and understandably so,” said Vicki Bryan, an analyst with Gimme Credit, a bond research firm. WCI has $2.18 billion in assets and $1.92 billion in debts, according to its bankruptcy petition. Its chief executive, Jerry Starkey, will leave the company effective immediately after agreeing with WCI on a “mutually satisfactory severance package” and will be available for consultation, the company said in a statement. The former chief operating officer, David L. Fry, was named interim president and chief executive. Beazer Homes USA is the builder most likely to declare bankruptcy next, Ms. Bryan said. When Beazer reports its third-quarter earnings on Friday, the company will probably reveal such significant write-downs on land that is losing value that it might trip the covenants its banks have set to determine its minimum tangible net worth, she said. Beazer did not immediately respond to requests for a reaction to Ms. Bryan’s statement. About 130 of WCI’s subsidiaries also declared bankruptcy with the company, but its Prudential Florida real estate brokerage, its mortgage business and other joint ventures did not. http://www.nytimes.com/2008/08/05/business/05build.html?ref=business |
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