MatlinPatterson Global Advisors has agreed a rescue financing package worth more than $510 million (€327 million) with Standard Pacific, a 42-year-old US homebuilder that reported a $216.4 million first quarter loss and is in trouble with its lenders.
The private equity firm, which specializes in distressed investing, already holds some $128.5 million of the company’s senior and subordinated debt, which will be exchanged for warrants to acquire preferred stock. The transaction will equate to 89.4 million shares of common stock at $4.10 per share.
MatlinPatterson will purchase an additional $381 million in senior convertible preferred stock, representing 125 million shares of common stock convertible at $3.05 per share, or at a 37 percent premium to the company’s closing share price on 23 May.
Post-transaction, Southern California-based Standard Pacific will hold a $152.5 million rights offering of 50 million common shares, which MatlinPatterson has agreed to backstop.
Standard Pacific said the rights offering, as well as the deal’s other components, hinge on “satisfactory amendment to the company’s bank credit facilities”, which it has been renegotiating with lenders.
The homebuilder recently received a second default waiver extension from lenders to renegotiate debt covenants it has violated in terms of debt-to-equity ratios and net worth requirements. Standard Pacific said it has been unable to meet the requirements in part due to a $180.5 million FAS 109 deferred tax valuation allowance charge, reported building industry magazine Builder.
Standard Pacific had a 2.03 debt-to equity ratio as of 31 March and tangible net worth of $758.2 million, while its covenants require a maximum ratio of 1.75 and a minimum net worth of $1 billion, reported Builder.
The most recent default waivers extension caused Standard Pacific’s lenders to decrease its credit revolver to $500 million from $700 million.
MatlinPatterson will appoint three people to Standard Pacific’s board of directors, a number which can increase over time though the private equity firm-designated board members can never constitute a majority.
Standard Pacific builds homes in California, Arizona, Florida, the Carolinas, Texas, Colorado and Nevada. It also has mortgage and title service subsidiaries.