Lenders gave Pennsylvania-based Orleans Homebuilders more time to work with them on an amendment to its $440.0 million credit facility that, once finalized, will allow the company to increase its borrowing ability while modifying some burdensome covenants for the life of the loan.
In an announcement released Friday after market close, Orleans management stated that lenders had waived certain covenants related to its credit facility, namely a covenant that required the company to maintain a borrowing base of more than its outstanding borrowings, through Feb. 6, at which time management expected to have come to a final agreement with lenders.
"The current home building environment is a challenging one; however, we are managing through it. Thanks to the support of our lender group, we obtained this limited waiver and are in the process of completing an amendment which will assist us in managing our business appropriately," said CEO Jeffrey P. Orleans in the release.
The Orleans management team went through a similar exercise this past fall as the company neared the end of its fiscal first quarter on Sept. 30. Facing a potential default on an existing credit facility waiver, Orleans management secured a waiver extension that ultimately led to an amendment to the credit facility agreement.
Management had secured the initial waiver on its credit facility following a $43.5 million deferred tax charge taken during its fiscal third quarter, ended March 31, that triggered defaults on tangible net worth, maximum leverage, and land-to-net-worth covenants attached to the revolver. The September amendment reduced the size of the facility by 25%, from $585.0 million to $440.0 million; modified certain covenants, including minimum tangible net worth, cash flow, and liquidity requirements; and eliminated several others, such as maximum leverage, minimum debt service, and spec-to-closings ratios.