BENSALEM, Pa., Dec. 8 /PRNewswire-FirstCall/ -- Orleans
Homebuilders, Inc. (the "Company") (AMEX:OHB) announced today that
on December 3, 2009, the Company agreed to a non-binding term sheet
(the "Term Sheet") relating to a maturity extension and structural
modification (the "Amendment") of the Company's $375 million Second
Amended and Restated Revolving Credit Loan Agreement dated
September 30, 2008 (as amended, the "Credit Facility"). The Company
currently anticipates that the formal documentation relating to the
Amendment will be completed, executed and become effective on or
before January 29, 2010. Further, the Company and certain of its
lenders have agreed in principle today on a limited waiver and
amendment (the "Temporary Amendment") of the Credit Facility which
generally provides, among other things, the Company with the
ability, subject to compliance with conditions precedent and
covenants, to borrow under the Credit Facility until approximately
January 29, 2010 and to extend letters of credit issued under the
Credit Facility to February 26, 2010. The Term Sheet has been
approved by the Company's Board of Directors, executed by the
Company and has been recommended by certain lenders. The Term Sheet
contemplates significant structural and covenant changes to the
Credit Facility, including a 24-month maturity extension; the
granting of additional collateral; certain material step-down
requirements in the size of the Credit Facility which principal
step-downs are generally coincidental with the required material
land asset sales over the next 6 to 18 months, with the application
of the net proceeds from the build-out and sale of work-in-process
housing units over the next approximately nine months in certain of
the communities that may be sold without the construction of new
spec units in these specific locations, and future federal tax
refunds, each as described generally herein. The Term Sheet
provides for a potential significant principal reduction or debt
forgiveness by the lenders if the Company can either retire or
refinance the entire restructured Credit Facility, or if the
Company can recapitalize or sell the Company primarily within the
next 6 to 12 months following the ultimate closing date of the
Amendment, although realization of any principal reduction or debt
forgiveness is subject to significant conditions, including
recapture, as to which the Company can offer no assurance of
satisfaction. The Company believes that the Amendment, when
completed in accordance with the Term Sheet, should provide the
Company with adequate liquidity to continue its operations in the
near term, including potentially for up to the next 12 to 18
months. Each of the Amendment and the Temporary Amendment will be
subject to an affirmative vote by each of the approximately 16
lenders party to the Credit Facility and the Company can offer no
assurances that each of the lenders will approve either the
Temporary Amendment or the Amendment or as to the specific terms of
either document that may be approved. If the Company does not enter
into the Temporary Amendment on or before December 20, 2009, the
Credit Facility will mature on that date and the Company will not
have sufficient funds to repay amounts outstanding or continue
normal operations. Jeffrey P. Orleans, President, Chief Executive
Officer and Chairman of the Board, stated that "We appreciate the
support of the bank group and we look forward to approval of the
Temporary Amendment and to finalizing the longer-term bank maturity
extension. We are seeing some stabilization in the economy through
improvement in year-over-year net orders and we believe that we
have the opportunity to successfully recapitalize and reposition
our Company, or to complete other strategic alternatives that we
are actively pursuing." The Term Sheet provides for a potential
significant principal reduction of up to $70 million of the Credit
Facility (the "Credit Facility Principal Reductions") if the
Company can either retire or refinance the entire restructured
Credit Facility, or if the Company can recapitalize or sell the
Company, each within 6 months following the ultimate closing date
of the Amendment (the "Closing Date"). Such Credit Facility
Principal Reduction is reduced to $45 million for the period that
is after 6 months but before 12 months from the Closing Date, and
it is generally $15 million thereafter. The Term Sheet sets forth a
number of significant conditions to the occurrence of any Credit
Facility Principal Reduction, including, among other things, a
requirement for a significant amendment to the Company's $30
million of 8.52% trust preferred securities and it also provides
that the lenders can recapture or reduce Credit Facility Principal
Reductions from certain amounts that might otherwise be available
for distribution to holders of the Company's equity securities.
Accordingly, there can be no assurance that the Company will be
able to achieve any such Credit Facility Principal Reduction. In
addition, a strategic transaction that might result in a Credit
Facility Principal Reduction may still provide little or no value
for either the Company's unsecured creditors or equity holders or
may result in substantial dilution to the Company's equity holders.
The Company also announced that it had previously engaged BMO
Capital Markets Corp. and Lieutenant Island Partners LLC
(collectively the "Strategic Advisors") who are acting as advisors
in connection with a potential sale or recapitalization of the
Company, which strategic activities are ongoing. The Company has
additional financial advisors for its negotiations relating to the
Credit Facility, Term Sheet, Amendment and Temporary Amendment. The
Company anticipates that even if it successfully enters into the
Amendment, without either a refinancing, recapitalization or
outright Company sale within approximately 12 months from closing
the Amendment in accordance with the Term Sheet, or further
modifications to the Amendment, the Company would be unlikely to
have sufficient liquidity to continue its normal operations for an
extended period thereafter. The expected terms of the Amendment
will require the Company to complete a series of significant land
asset sales; although the Company presently anticipates that it
will retain sufficient land positions for several years of lot
supply. The anticipated asset sales may include substantially all
of the Company's undeveloped land positions as well as certain
other positions, which are to be sold, subsequent to receipt of new
bank appraisals and approvals, over the next 18 months, but
primarily over the next 12 months. The Amendment is also expected
to prohibit future site improvement expenditures related to these
designated land positions; limit significantly the acquisition of
new lots and land; and enable completion of existing
work-in-process housing inventory units in many of such communities
without new spec unit starts in certain specific locations. The
Amendment will also prohibit the construction of new
work-in-process housing units in all communities approximately six
to eight months prior to the new 24-month maturity date of
approximately January 2012. The Company currently expects that such
asset sales will result in material financial losses, both relative
to book value reflected on the March 31, 2009 Quarterly Report on
Form 10-Q (the latest financial statements that the Company has
filed with the SEC) and to bank borrowing base value, respectively,
of such assets. Garry P. Herdler, Executive Vice President and
Chief Financial Officer, stated: "We continue to work
constructively with our lenders to structure and document the
longer term bank maturity extension and other necessary facility
modifications. The combination of the agreement in principal on the
credit facility maturity extension, including the banks'
willingness to potentially accept a significant principal reduction
under certain limited circumstances, together with the
significantly discounted below par redemption option under the $75
million private debt exchange agreement completed on August 3,
2009, should assist the Company in achieving a recapitalization,
refinancing or sale of the Company in the next 6 to 12 months.
However, we cannot offer any assurance as to the ultimate terms of
any extension or modification of the credit facility, whether any
refinancing, recapitalization or sale transaction will occur or, if
such a transaction occurs, the terms thereof." Subject to the
foregoing, the Company currently expects that it and its lenders
will enter into the Temporary Amendment on or before approximately
December 14, 2009 and the Amendment on or before January 24, 2010,
although the Company can offer no assurance that it will be able to
do so in either instance. The Company anticipates that without the
Temporary Amendment: (i) the existing letters of credit under the
Credit Facility will be unable to be extended beyond December 20,
2009, and, accordingly, the beneficiaries will present the letters
of credit for drawing on or prior to December 18, 2009, which will
result in near immediate deemed increases in the outstanding
balances of the Credit Facility and corresponding near immediate
reductions in the net borrowing base availability at such time;
(ii) the Credit Facility will otherwise mature on December 20, 2009
and (iii) the Company will likely not have sufficient liquidity to
continue its normal operations at that respective time (or shortly
thereafter). The Company anticipates that without the Amendment:
(i) the Credit Facility will otherwise mature on approximately
January 29, 2010, unless deemed earlier by the terms of the
Temporary Amendment; and (ii) the Company will likely not have
sufficient liquidity to continue its normal operations at or before
that time. Even if the Company successfully enters into the
Temporary Amendment, the Company could experience liquidity
problems due to borrowing base limitations or covenant or other
defaults under the Credit Facility which the Company currently
believes, under the terms of the Temporary Amendment, could occur
on or before January 15, 2010. In addition, in the event that, at
any time, beneficiaries of letters of credit draw under outstanding
letters of credit, any draw will have an adverse effect on the
Company's ability to borrow under the Credit Facility and draws of
any significant amount of letters of credit will materially
adversely affect the Company's liquidity to continue its
operations. For additional discussion of the Company's liquidity,
including a discussion of the scheduled December 20, 2009 maturity
date of the Company's Credit Facility, please refer to the
Liquidity and Capital Resources section of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2009 filed with
the Securities and Exchange Commission on May 15, 2009, as well as
the Current Reports on Form 8-K and press releases filed with the
Securities and Exchange Commission on August 14, 2009, October 6,
2009 and November 5, 2009, the Company's Form 12b-25 related to
Form 10-K filed with the Securities and Exchange Commission on
September 29, 2009, and the Company's Form 12b-25 related to Form
10-Q filed with the Securities and Exchange Commission on November
17, 2009. $30 Million 8.52% Trust Preferred Securities and Junior
Subordinated Notes Update On September 30, 2009, the Company did
not make the required $639,000 payment related to its $30 million
issue of 8.52% trust preferred securities; the 30-day grace period
related to the failure to make such payment expired on October 30,
2009 and the Company has received from the property trustee for
these trust preferred securities a notice of an event of default
under this issue. In light of these ongoing bank negotiations, the
Company also announced today that it does not currently intend to
make the quarterly payment of $639,000 due on December 30, 2009
with respect to the $30 million issue of 8.52% trust preferred
securities until at least the completion of the Amendment, which
will constitute a further event of default on such securities. The
holders of this issue of trust preferred securities have to-date
not chosen to accelerate the payment of these securities; the
Company cannot, however, offer any assurances that the holders will
not choose to do so in the future. On October 30, 2009, the Company
did not make the required $235,000 scheduled payment related to the
junior subordinated notes (the "Junior Subordinated Notes")
exchanged by the Company on August 3, 2009 for its previous $75
million issue of trust preferred securities; the 30-day grace
period related to the failure to make such payment expired on
November 29, 2009. As a result, on December 3, 2009, the holders of
the Junior Subordinated Notes presented to the bank issuer
documentation to draw the full amount of a $5 million letter of
credit originally issued in August 2007. Application of a portion
of these funds to overdue interest has cured the underlying event
of default relating to the overdue payment under the Junior
Subordinated Notes. Application to Company of Recently Passed
Federal Tax Legislation On November 6, 2009, President Obama signed
into law H.R. 3548, the "Worker, Homeownership and Business
Assistance Act of 2009." Among other things, this law extends the
$8,000 First-Time Homebuyer Tax Credit through April 30, 2010, and
provides a $6,500 credit to certain other homebuyers through April
30, 2010. In addition, the Act generally increases from two to five
preceding years, the period for which businesses can offset net
operating losses in 2008 or 2009 against prior years' taxable
income. With the passing of this five year tax loss carry back
provision, the Company currently anticipates that it will file for
and receive a federal income tax refund in early calendar 2010 of
approximately $18 million. However, there can be no assurance as to
the amount or timing of receipt of any such refund. About Orleans
Homebuilders, Inc. Orleans Homebuilders, Inc. develops, builds and
markets high-quality single-family homes, townhouses and
condominiums. The Company serves a broad customer base including
first-time, move-up, luxury, empty nester and active adult
homebuyers. The Company currently operates in the following eleven
distinct markets: Southeastern Pennsylvania; Central and Southern
New Jersey; Orange County, New York; Charlotte, Raleigh and
Greensboro, North Carolina; Richmond and Tidewater, Virginia;
Chicago, Illinois; and Orlando, Florida. The Company's Charlotte,
North Carolina operations also include adjacent counties in South
Carolina. To learn more about Orleans Homebuilders, please visit
http://www.orleanshomes.com/. Forward-Looking Statements Certain
information included herein and in other Company statements,
reports and SEC filings is forward-looking within the meaning of
the Private Securities Litigation Reform Act of 1995, including,
but not limited to, statements concerning anticipated or expected
financing arrangements; the anticipated Temporary Amendment and
Amendment; payments on its 8.52% Trust Preferred Securities and the
Junior Subordinated Notes; anticipated tax refunds and the timing
of receipt of any refund; potential strategic transactions,
including refinancing, recapitalization and sale transactions
involving the Company; anticipated and potential asset sales;
anticipated liquidity; anticipated increase in net new orders,
conditions in or recovery of the housing market, and economic
conditions; the Company's long-term opportunities; continuing
overall economic conditions and conditions in the housing and
mortgage markets and industry outlook; anticipated or expected
operating results, revenues, sales, net new orders, backlog, pace
of sales, spec unit levels, and traffic; future or expected
liquidity, financial resources, debt or equity financings,
amendments to or extensions of our existing revolving Credit
Facility; strategic transactions and alternatives; the anticipated
impact of bank reappraisals; future impairment charges; future tax
valuation allowance and its value; anticipated or possible federal
and state stimulus plans or other possible future government
support for the housing and financial services industries;
anticipated cash flow from operations; reductions in land
expenditures; the Company's ability to meet its internal financial
objectives or projections, and debt covenants; the Company's future
liquidity, capital structure and finances; the Company's response
to market conditions; and the Company's response to the Exchange's
notice concerning listing requirements. Such forward-looking
information involves important risks and uncertainties that could
significantly affect actual results and cause them to differ
materially from expectations expressed herein and in other Company
statements, reports and SEC filings. These risks and uncertainties
include our ability to amend and extend the Credit Facility; our
ability to remain in compliance with the terms of the Credit
Facility, if the Temporary Amendment and/or the Amendment are
entered into; local, regional and national economic conditions; the
effects of governmental regulation; the competitive environment in
which the Company operates; fluctuations in interest rates; changes
in home prices; the availability of capital; our ability to engage
in a financing or strategic transaction; the availability and cost
of labor and materials; our dependence on certain key employees;
and weather conditions. In addition, there can be no assurance that
the Company will be able to obtain any Amendment to or extension of
its existing revolving Credit Facility or other alternative
financing or adjust successfully to current market conditions.
Additional information concerning factors the Company believes
could cause its actual results to differ materially from expected
results is contained in Item 1A of the Company's Annual Report on
Form 10-K/A for the fiscal year ended June 30, 2008 filed with the
SEC and subsequently filed Quarterly Reports on Form 10-Q.
DATASOURCE: Orleans Homebuilders, Inc. CONTACT: Garry P. Herdler -
Executive Vice President & Chief Financial Officer of Orleans
Homebuilders, Inc., +1-215-245-7500 Web Site:
http://www.orleanshomes.com/
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