For the third time, WCI Communities' lenders have waived its covenant violations while they negotiate a longer-term amendment that might give the beleaguered Florida builder enough financial flexibility to survive.

The holders of its senior secured credit and its term agreement initially gave the company an extension for violating its fixed charge requirements on Nov. 7, 2007, then extended it on Dec. 7, then again on Monday, Jan. 7, 2008. The new deadline for reaching an agreement is Jan. 16.

If negotiations fail, the company has said its financial viability is seriously in question.

"At this time, it is not certain that we will reach agreement or obtain approval of the anticipated longer-term amendment," the company said in its latest earnings release. "The amendment will be expensive, and there can be no assurance that we will be able to comply with the amended covenants and other requirements."

If no agreement is reached, the lenders would be able to foreclose on collateral and demand payment of the loans in full. That could unleash a cascade of similar moves by the company's other lenders, leaving the company looking for other sources of cash that may not appear, "which could impair our ability to maintain sufficient working capital," the release warned. "Either situation could have a material adverse effect on the solvency of the company."

The company has little cash on hand to keep it going if its loans are pulled. At the end of September, it had $7.1 million on hand, compared to $41.9 million at the end of September 2006.

The large number of expensive towers in its Florida market that were scheduled to close last year, flooding the company's decimated cash account with $1 billion, experienced an unprecedented level of cancellations as well as construction delays that, at one point last year, actually had the company's towers experiencing more cancellations than sales.

The defaults forced WCI to increase its default reserve for towers under construction by $23.7 million. In total, the company recorded $36.6 million in unfavorable adjustments, anticipating higher construction costs due to design revisions, additional interest costs due to increased construction cycle times, increased building insurance costs, and discounts and incentives that it expects to have to provide to sell the units.

In addition to the tumultuous home building market, WCI faced a number of challenges last year. Among the highest profile hurdles was seen with the billionaire financier Carl Icahn, who bought a large share in the company a year ago and then attempted to buy all the company's stock last spring for $22 per share. He withdrew the tender offer as the stock price plummeted, then, along with a number of his representatives, ended up with a seat on the board.

During Icahn's assault, WCI put the company up for sale, then pulled it off the market over the summer as it became clear there was no market for the company in the face of the plummeting home building scenario.