Beazer Homes USA has filed a lawsuit against one of its lenders, asking a judge to hold off "vulture investors" who it says are illegally trying to force it into default on its loans so it will be required it to immediately pay back about $1.3 billion it has borrowed.
In the lawsuit, filed Tuesday (August 21) in U.S. District Court in Atlanta, Beazer says U.S. Bank National Association's trustee has told it that Beazer would be in default of its loan agreements if it does not provide it with a copy of its Form 10-Q reporting its financial results for the quarter ended June 30 by Friday (August 24).
Beazer has delayed filing the document with the U.S. Securities and Exchange Commission because an independent accountant, hired to investigate charges of mortgage irregularities at the company, needed extra time to decipher what may have been some accounting errors.
"The Trustee and the Noteholders have commenced a campaign that seeks to capitalize on Beazer's delay in filing the Form 10-Q and force the accelerated repayment of approximately $1.3 billion in debt," the lawsuit said.
"The motivation for the campaign is clear: many of the noteholders, including a number of "vulture investors", have scooped up Beazer's bonds at discounted prices in light of both the dramatic and well-publicized downturn in the credit markets and Beazer's previous disclosures. Those investors now seek to make a quick profit by attempting to accelerate full repayment."
In the lawsuit, Beazer says U.S. Bank's trustee appears to be trying to enforce a clause that requires it to deliver copies of its SEC filings within 15 days after they are filed. Beazer says that, since it hasn't filed the 10-Q with the SEC yet, it has hasn't violated the 15-day reporting requirement.
Beazer is asking the court to interpret the loan document as it has and to prevent U.S. Bank's trustee from throwing its debt into default. Already, Beazer says, it has already caused it "irreparable harm" by raising the specter of being in default of its loan covenants.
"For example in just the last few days, two leading credit rating agencies ? Standard & Poor's and Moody's ? announced that they were placing Beazer's credit ratings under review for downgrade. Among other things, the ratings agencies referenced the Delivery Covenants and the concern that Beazer's filing delay could lead the Trustee and/or the Noteholders to claim a default under the Beazer Indentures. Fitch actually downgraded Beazer's credit rating."
Also, requiring Beazer to pay back "this staggering amount of money at once, and prior to the maturity date of the Notes, would necessarily and unconscionably divert funds away from Beazer's business operations," the suit says.
This is only the latest in a series of troubles that has beset the Atlanta-based builder since a series of stories in The Charlotte Observer brought to light a high level of mortgage foreclosures in an older Beazer-built neighborhood and alleged the company may have bent lending rules to get buyers into homes they couldn't afford.