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Are these the latest days of Beazer
Sunday, 26 August 2007

With creditors knocking, Beazer seeks court's help
Atlanta-based Beazer Homes appears to be struggling to avert bankruptcy. Atlanta asking that the court prevent its creditors from calling for immediate repayment of about $1.3 billion in loans. The creditors' move was prompted by Beazer's delay of its quarterly financial report, but the company says creditors are invoking a technicality to trigger a big payday. "The motivation for this effort is clear," states Beazer's complaint against U.S. Bank National Association. "Many of the noteholders, including various hedge funds and other opportunistic investors, have purchased Beazer's bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding accelerated repayment in full."

With creditors knocking, Beazer seeks court's help

The Atlanta Journal-Constitution
 08/23/07

Atlanta-based Beazer Homes appears to be struggling to avert bankruptcy.

Atlanta asking that the court prevent its creditors from calling for immediate repayment of about $1.3 billion in loans.

The creditors' move was prompted by Beazer's delay of its quarterly financial report, but the company says creditors are invoking a technicality to trigger a big payday.

"The motivation for this effort is clear," states Beazer's complaint against U.S. Bank National Association. "Many of the noteholders, including various hedge funds and other opportunistic investors, have purchased Beazer's bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding accelerated repayment in full."

In the filing, Beazer points out the company has never missed a payment on the debt.

Earlier this month, Beazer announced that its report for the financial quarter from March 1 to June 30 would be delayed because its former chief accountant, Michael T. Rand, may have overstated the company's reserves and some other costs.

Rand was fired June 27 for attempting to shred documents in violation of Beazer's document retention policy, according to a filing with the Securities and Exchange Commission.

Barry Ritholtz, president of Ritholtz Research and Analytics, said the court filing indicates that Beazer's failure to file the required quarterly report probably violates the debt agreement it provided to the banks that hold the notes on its loans.

"It's clear that Beazer way overextended themselves during the boom period," Ritholtz said.

Reports in Charlotte of unusually high foreclosure rates in Beazer communities sparked an investigation by the U.S. Attorney's Office there into whether the company's mortgage arm filed false loan documents so Beazer could sell houses to unqualified buyers who later defaulted on the payments.

That news was followed by an SEC investigation, as well as pending lawsuits by Beazer's customers, shareholders and pension plan participants. Amid all this turmoil, Beazer's failure to file the quarterly report on time has apparently unnerved its creditors, Ritholtz said.

"All the other improprieties have given these creditors no reason to cut these guys any slack," Ritholtz said.

Calls to a Beazer spokeswoman were not returned.

Beazer's stock price has dropped dramatically amid reports of the investigations, the lawsuits and the abrupt departures of the company's in-house attorney and its chief financial officer in addition to Rand. The company also has posted two consecutive quarters of losses amid the most dismal housing market in more than a decade.

Beazer shares closed Wednesday at $11.02. In January, before the troubles began, its stock was trading at more than $45.

Beazer asserts in the court filing that being forced to repay the debt has inflicted "significant and irreparable harm ... to Beazer, its reputation in the market and its shareholders."

To illustrate its point, Beazer points to the recent downgrade of its credit by the major rating agencies.

Ritholtz sees Tuesday's court filing as a desperation maneuver to avert the catastrophic losses that repaying the $1.3 billion would inflict on the company. But he said the loan agreements are likely to give the banks the upper hand in the dispute.

Beazer is "going to have a hard time voiding that," Ritholtz said. "Basically, they're throwing themselves on the mercy of the court."

In July, Beazer was forced to issue a statement to stem speculation that a bankruptcy filing was imminent, a Wall Street rumor the company termed "scurrilous and unfounded."

The painful realities of the financial markets are stacked against Beazer, however, Ritholtz said. Nervous creditors, steeped in news of a housing sales and price slump expected to last well into next year and a mortgage market swamped by a rising tide of foreclosures, could well deal Beazer a killing blow by recalling their loans.

"The creditors will get paid in full. They don't care if the company goes belly up," Ritholtz said. "It's heartless and cold, but, as they say on Wall Street, if you want a friend, go get a dog."
http://www.ajc.com/metro/content/business/stories/2007/08/22/beazer_0823.html

 
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