WCI to Restructure Debt under Chapter 11; David L. Fry Named Interim President and CEO
August 04 2008 - 9:28AM
Business Wire
WCI Communities, Inc. (NYSE:WCI), a leading developer, builder and
seller of luxury homes and tower units, announced today that it and
approximately 130 of its wholly-owned subsidiaries had filed
voluntary petitions to restructure their debt and capital. Excluded
from the filing is the company�s Watermark real estate brokerage,
which does business as Prudential Florida WCI Realty, as well as
its WCI Mortgage business and certain other joint ventures in which
WCI is a partner. Prudential Florida WCI Realty will continue to
provide a full menu of real estate services, including new home and
resale brokerage services, as well as foreclosure and rental
management services. The company said realtors, brokers and
customers will see no interruption in these services. All
commissions and other obligations will be honored and paid. WCI
Mortgage, an affiliate of Well Fargo Home Mortgage, will continue
to offer competitive mortgage packages and will honor all of its
existing obligations. Carl C. Icahn, chairman of WCI�s Board of
Directors said, �The company, with all diligence, has attempted to
avoid a bankruptcy filing. However, the filing became�necessary
because of the recent failed effort�to obtain financing and the
recognition that the company�s entire $1.8 billion of debt may soon
be in default. This was confirmed when�certain holders of the
company�s $125 million convertible notes informed the company
that�they rejected its exchange offer�and instead insisted on being
paid in cash in full on August 5, 2008.� WCI also announced that it
and Jerry L. Starkey, who served as WCI�s chief executive officer
since 2005, mutually determined that, with the company going in a
new direction�and operating in�bankruptcy, it is time for new
leadership at the CEO level. Accordingly, Mr. Starkey will leave
the company effective immediately. The�company said that it and its
Board�thanked Mr. Starkey�for the work that he has done to make WCI
a recognized industry leader. He�will continue to be available for
consultation and cooperation with the company as necessary. The
company and Mr. Starkey have agreed upon a mutually satisfactory
severance package. David L. Fry, 48, has been appointed by the
Board to act as interim president and chief executive officer,
pending the selection of a permanent CEO. The Board intends to
commence its search for a new chief executive officer and president
immediately. Mr. Fry joined WCI in 1995 and was appointed as chief
operating officer in November 2007. In addition to his new
responsibilities, Mr. Fry will continue to be responsible for WCI�s
operations nationwide. Company Operations to Continue;
Post-Petition Funds Available In advance of the filing, the company
reached a definitive agreement with its principal secured lenders
regarding the terms on which the company will have access to over
$50 million of cash on hand to continue operating its business on
an interim basis. A motion for approval of that arrangement has
been filed with the Bankruptcy Court. In addition, WCI has received
a proposal from certain of its senior lenders to provide an
additional $100 million of excess liquidity through a debtor in
possession (DIP) loan facility. WCI and its lenders are in advanced
stages of negotiations regarding the terms of the proposal, which
if accepted by WCI, would be subject to definitive documentation
and Court approval. �While WCI remains cash-flow positive and our
asset base is strong, our ongoing operations have been adversely
impacted by the continuing downturn in the real estate sector and
the overall economy,� said David L. Fry, the company�s interim
president and chief executive officer. �Like other large
homebuilders across the country, WCI continues to experience
declines both in pricing and the sale of new homes and
condominiums, as well as dramatic increases in cancellation rates.
�As a result, we need to restructure our debt and bring our capital
structure in line with today�s marketplace realities. We believe
Chapter 11 provides the most efficient and timely process for
accomplishing this,� he said. "Day-to-day operations will continue
as usual, while we work with our stakeholders to restructure the
balance sheet,� Mr. Fry said. �We will continue to sell, build and
deliver homes without interruption. Construction and sales
activities will continue; employees will come to work and be paid.�
Recreational Amenities and Services to Continue �As always,� Mr.
Fry said, �Customer satisfaction remains our number one priority
and WCI�s high standards of excellence and its commitment to
providing customers with extraordinary lifestyle experiences will
continue.� Mr. Fry said that recreational amenities and services at
each of the company�s clubs and community associations will also
continue, adding that the company has requested Court permission to
continue to pay the full amount of its dues and deficit obligations
to its various community associations and clubs. The company is
also seeking Court approval to establish procedures to pay valid
lien claims as they come due and to sell homes free and clear of
all liens to ensure that ongoing home sales activities continue
uninterrupted. Additionally, the company has asked the Court to
confirm that all funds deposited by buyers in First Fidelity, the
company�s title insurance company, can be distributed at closing.
WCI has taken steps to ensure that all of its customer programs
continue without interruption, including its comprehensive
warranties. It is currently in final negotiations with one of its
present insurers, AIG, to provide a supplemental warranty at no
cost to those WCI Communities homebuyers with contracts of sale
currently in force, as well as those customers who enter into new
contracts with the company. Once coverage is in place, in the
unlikely event that the company cannot perform under its
obligations to eligible homebuyers, AIG will perform the company�s
warranty obligations as provided by the terms of the supplemental
warranty. Note Offering Terminated Along with its Chapter 11
filing, WCI Communities is terminating its offer to exchange�$125
million of 4.0% contingent convertible senior subordinated notes
due 2023. In accordance with the terms of the offering, WCI
Communities will instruct the exchange agent to return the notes,
which were tendered for their exchange, to their respective
tendering bondholders. WCI Communities has established a toll-free
information line for vendors, customers and other interested
parties. The number is 800-924-1890. Information is also available
at www.wcicommunities.com The Chapter 11 petitions were filed in
the U.S. Bankruptcy Court for the District of Delaware in
Wilmington. About WCI Communities, Inc. WCI is a fully integrated
homebuilding and real estate services company with more than 50
years experience in the design, construction and operation of
leisure-oriented, amenity rich master-planned communities. It has
operations in Florida, New York, New Jersey, Connecticut,
Massachusetts, Virginia and Maryland. The company directly employs
approximately 1,800 people, as well as approximately 1,800 sales
representatives as independent contract employees. Forward Looking
Statement Disclaimer Certain information included herein and in
other company reports, Securities and Exchange Commission filings,
statements and presentations is forward-looking within the meaning
of the Private Securities Litigation Reform Act of 1995, including,
but not limited to, statements about the company's ability to
operate its business while in Chapter 11 proceedings, anticipated
operating results, financial resources, ability to acquire land,
ability to sell homes and properties, ability to deliver homes from
backlog, and ability to secure materials and subcontractors. 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 reports, filings, statements and
presentations. These risks and uncertainties include WCI's ability
to compete as a going concern in real estate markets where we
conduct business; WCI�s ability to obtain court approval with
respect to motions in the chapter 11 proceeding prosecuted by it
from time to time; the ability of WCI to develop, prosecute,
confirm and consummate one or more plans of reorganization with
respect to the chapter 11 cases; risks associated with third
parties seeking and obtaining court approval to terminate or
shorten the exclusivity period for WCI to propose and confirm one
or more plans of reorganization, for the appointment of a chapter
11 trustee or to convert the cases to chapter 7 cases; WCI�s
ability to obtain and maintain normal terms with vendors and
service providers; WCI�s ability to maintain contracts that are
critical to its operations; the potential adverse impact of the
chapter 11 cases on WCI�s liquidity or results of operations; the
ability of the WCI to fund and execute its business plan; the
ability of WCI to attract, motivate and/or retain key executives
and associates; WCI's ability to maintain or increase historical
revenues and profit margins; WCI's ability to obtain necessary
permits and approvals for the development of its lands; the
availability of capital to WCI and our ability to effect growth
strategies successfully; availability of labor and materials and
material increases in insurance, labor and material costs;
increases in interest rates and availability of mortgage financing;
the ability of prospective residential buyers to obtain mortgage
financing due to tightening credit markets, appraisal problems or
other factors; increases in construction and homeowner insurance
and availability of insurance, the continuing negative buyer
sentiment and erosion of consumer confidence; the negative impact
of claims for contract rescission or increasing cancellation rates
by contract purchasers; adverse legislation or regulations; adverse
legal proceedings; the ability to retain employees; changes in
generally accepted accounting principles; natural disasters;
adverse weather conditions; and changes in general economic, real
estate and business conditions and other factors over which the
company has little or no control. If one or more of the assumptions
underlying our forward-looking statements proves incorrect, then
the company's actual results, performance or achievements could
differ materially from those expressed in, or implied by the
forward-looking statements contained in this report. Therefore, we
caution you not to place undue reliance on our forward-looking
statements. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. This statement is provided as permitted
by the Private Securities Litigation Reform Act of 1995.
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