Standard Pacific closed phase one of its deal with MatlinPatterson Global Advisors Monday, June 30, which will provide a $530 million cash infusion into the heavily indebted company.

MatlinPatterson bought approximately $381 million of new Standard Pacific senior convertible preferred stock, which, subject to shareholder approval, would convert into 125 million shares of the company's common stock at $3.05 per share.

In addition, MatlinPatterson traded $128.5 million of the company's bond debt it owned in return for warrants to acquire more preferred stock that would potentially convert into 89.4 million shares of common stock at the exercise price of $4.10 per share.

"With the closing of the first phase of MatlinPatterson's investment, the amendment to our credit facilities, and with a substantial increase in our cash on hand, we believe we are well positioned to weather the current housing downturn and to take advantage of opportunities as they arise," said Jeffrey V. Peterson, Standard Pacific's chairman, CEO and president.

The closing was contingent on Standard Pacific amending its bank credit facilities. Under the amendments, Standard Pacific reduced its total revolving line of credit from $500 million to $395 million, paid down its revolver balance from $90 million to $50 million, and paid down one of its term loan credit facilities from $100 million to $65 million. It also agreed to make quarterly principal amortization payments of $2.5 million under the revolver and the term loan and to secure future borrowings.

Standard Pacific is now moving forward with the second phase of the transaction, a $152.5 million--or $3.05 a share--rights offering for about 50 million shares of common stock, in which the existing stockholders will be able to participate in on a pro-rata ownership basis. MatlinPatterson has agreed to buy any unsold shares of the preferred stock.

Shortly after former Standard Pacific CEO Steve Scarborough retired in the spring, the company announced it was exploring options to infuse the company with capital. Standard Pacific has a large amount of debt coming due in the next few years that it was worried it would not be able to repay because of its drastically reduced sales pace.

"We talked to strategic partners and financial entities," Peterson said during the June 19 Bank of America investor conference. "Many of the speakers today, we have had dialogues with in the past...We were talking to the usual suspects [including some foreign fund investors."

But it was MatlinPatterson's David Paterson who called Standard Pacific to express interest in investing in the company. In fact, MatlinPatterson, which has assembled billions of dollars to be invested in the home building sector, had already invested $128 million in the company's bond debt--the same debt it has traded for stock. "Unbeknownst to us, they had done due diligence on us," Peterson said.

An agreement was announced the day after Memorial Day. Peterson said at the Bank of American conference that the arrangement will amount to an aggregate of $660 million in equity improvements when all is said and done.