In an effort to stave off a liquidity crisis that would likely result in bankruptcy, executives at TOUSA have proposed several amendments to the company's $200.0 million first-lien term loan credit agreement and $150.3 million revolving credit agreement. If approved by the lenders, this would mark the second amendment to loans.
In an 8-K filing with the Securities and Exchange Commission, management asked to extend a previously negotiated waiver of certain financial covenants through Feb. 1, as well as to revise some of its re-margin obligations with respect to its lenders and certain land banking partners. Re-margin obligations have come back to haunt TOUSA of late as impairments on some of the company's joint venture land investments have required the company to provide additional equity to the deals, ultimately increasing the its debt levels.
In addition, management sought a waiver of the cross-default provision resulting from any breach of a covenant regarding certain land banking arrangements. Because TOUSA has struggled to meet certain financial obligations, this request would protect the company from triggering additional defaults by being in noncompliance with the original financial obligations.
In exchange for leniency on these items, management agreed to pay a fee equal to 0.25% of the revolving credit commitment and term loan commitment of each lender that consents to the amendments.
Citigroup Global Markets provided TOUSA with the first-lien term loan as part of a settlement with Deutsche Bank over debt related to TOUSA's joint venture to acquire the assets of Transeastern Homes in 2005.