Orleans Homebuilders has inched closer to sealing a deal with its lenders to amend certain financial covenants related to its $585.0 million credit facility.

Management secured a critical extension on an existing waiver earlier this week after facing a default on the credit facility. The original waiver, which gave the company a break from certain financial covenants, was set to expire on Sept. 15.

However, with the new extension, which has a lifespan than runs through Sept. 29, Orleans executives have time to lace up the amendment deal, which has been in the works for some time.

In the company's latest release related to the waiver extension, CEO Jeffrey Orleans sounded an optimistic note: "We appreciate the continued support of our lending group in these challenging times. We believe that the extension of the waiver period together with the term sheet demonstrates our lending groups' confidence in our ability to continue to manage through the current home building environment. With our operating history of over 90 years in home building, we believe this confidence is well placed."

The company also is expected to file its annual 10-K with the Securities and Exchange Commission by Sept. 29.

Orleans secured the original waiver after a $43.5 million deferred tax charge during its fiscal third quarter, ending March 31, triggered defaults on tangible net worth, maximum leverage, and land-to-net-worth covenants attached to the revolver.

Without the expected amendment, a default on the revolver would be imminent. In turn, the default could affect the company's ability to service its debt, including making payments on $75 million in trust preferred securities. The interest rate on the securities is poised to jump as much as 300 basis points from 8.61%, as an August 2007 deal to defer the start of a punitive rate increase runs out. The new rates are expected to kick in at the end of October.

The company's ability to meet the additional debt obligations is in question as the company remains on shaky financial footing.

According to the company's most recently filed 10-Q, the company was sitting on $39.1 million cash and $511.9 million in debt at the end of March. In addition, the company's borrowing capacity will shrink significantly as roughly $121.0 million of its revolver matures on Dec. 20.