The only fact in evidence on March 21 regarding the departure to retirement of Stephen J. Scarborough from the CEO post at Standard Pacific Corp. (NYSE:SPF) on March 20, and his replacement with independent director Jeffrey V. Peterson, was that the move was sudden.

The company had no publicly-announced succession plan in place, nor did it indicate beforehand that its board was considering a change at the top. The disclosure, which came after the stock markets closed for the holiday weekend on March 20, took many by surprise.

Chris Kemmerly, whose Miramonte Homes in Tucson January completed the acquisition of Standard Pacific's Southern Arizona division, said he heard the news when he came to work on Friday morning. "I have no idea what precipitated this. "He's [Scarborough] a great guy, and one thing about Steve is that he truly cared about the employees."

Kemmerly sold his previous business, Kemmerly Homes in Tucson, to Standard Pacific in 2004. In that year, Kemmerly Homes built 180 homes and generated $48 million in revenue.

The fear of many investors in the company's common stock was evident in a question regarding whether the company was considering filing for bankruptcy protection, asked during a hastily arranged conference call with the company's new management team. Peterson responded, "I don't think it's appropriate to comment on that at this time on this call."

Other investors took the move as an indication that a sale of the company was imminent.

Standard Pacific is among the most heavily leveraged public companies in the home-building space, with a debt-to-backlog ratio of nearly 6 to 1. In its most recent 10K report, filed with the Securities and Exchange Commission for the 2007 fiscal year, stated, matter-of-factly, "We have a significant amount of debt. Our $900 million senior credit facility which, as of December 31, 2007, had borrowings outstanding of $90.0 million, matures in May 2011. In addition, we have an aggregate of approximately $1.6 billion in senior and senior subordinated notes and term loans that mature between 2008 and 2015. There can be no assurance that we will be able to extend or renew these debt arrangements on terms acceptable to us, or at all. If we are unable to renew or extend these debt arrangements, it could adversely affect our liquidity and capital resources and financial condition."

It added, "We have been unable to maintain compliance with the financial covenants contained in our debt instruments."

In fiscal 2007, the company lost $767.3 million. Since 2005, the company has taken nearly $1.4 billion in inventory, joint venture and goodwill impairments.

The company stated, "Our participation in these types of joint ventures has increased over time and will likely continue to represent a meaningful portion of our business." It also said, "These investments are highly illiquid and have significant risks."

Ivy Zelman, of Zelman and Associates, was not buying the talk among investors about a sale or bankruptcy filing. In a research note, she said, "Given Peterson's investment banking experience, as well as his candid responses on the conference call about the need for 'urgency' and 'decisive' actions, several investors speculated that this move was made by SPF to facilitate a sale of the company, or some other corporate restructuring. While we cannot rule out an eventual sale of the company, after talking to management following the conference call, as well as our industry contacts, we believe that this move was made to re-invigorate the company's employees in this challenging market environment and to build long-term shareholder value."

Zelman continued, "Reading between the lines, we have heard in recent months that SPF has focused on selling many of its top land parcels in markets such as California in order to generate cash and pay down debt. While we believe this was the prudent course of action given the company's leverage situation, our industry contacts reported that some of SPF's local operational managers had become frustrated with corporate's mandate to unload these strong projects."

The company does have its work cut out for it. Its regional distribution, as of yearend 2007, was 29% California, 17% Florida, 14% Arizona, 13% Texas, 13% the Carolinas, 5% Colorado, 1% Nevada, and 8% discontinued operations. Those top three are where the housing downturn has hit the hardest.

It also has significant, off-balance sheet exposure to joint ventures; it is the second among the big public building companies. In the 2007 fiscal 10K, the company said it had invested an aggregate of $294.0 million in joint ventures, which had borrowings outstanding of approximately $771.0 million, as compared to $301.6 million and $1,256.4 million at December 31, 2006, respectively. As of December 31, 2007, the company controlled 22 projects through what it called "JVs and other arrangements."

The company has partnered with different entities--from other big builders like Shea Homes and Centex, to land holders like The Irvine Company, to less conventional land lords like energy company Unocal. It is reputed to have done its boldest JV in 1997, when, along with Catellus Residential Group and Starwood Capital, it formed a partnership called Talega Associates to acquire and develop a 3,470-acre master-planned community near San Clemente, Calif.

The success of that 4,000 home community led to an opportunity in 2005, when the company partnered with St. Paul Insurance and IHP in the 1,240- acre Black Mountain Ranch project in San Diego.

In 2005, Big Builder reported on the unusual structure of the Black Mountain Ranch deal: The hitch was that St. Paul wanted to continue to be an investor after it sold the property and also required rather unorthodox payment terms that entailed letters of credit for six years. "Other builders thought those terms were unwieldy, but Standard Pacific saw an enormous opportunity," said Doug Neff of IHP Capital Partners. Neff's company helped Standard Pacific obtain the bank credit to enter into the deal. As has often been the case with Standard Pacific, the Black Mountain deal came down to the rapport that this builder established with the insurer. "It was really an interpersonal thing; we hit it off," said Fred Maas, president of Black Mountain Ranch LLC . "Letting St. Paul stay in as an equal partner was highly unusual."