Amid strong doubts from auditors and other stakeholders alike that the company could avoid bankruptcy, Reston, Va.-based Comstock Homebuilding Cos. continues to make progress on reorganizing its heavy debt load. Friday, the company announced that it had struck a friendly foreclosure deal on Aug. 17 with Wachovia Bank, N.A., that would effectively eliminate $17.8 million of the company's $77.2 million of secured debt.
The agreement, which is set to close in 4Q2009, helps to deleverage the struggling company's debt-laden balance sheet. At the close of its fiscal third quarter June 30, the company's total debt-to-capitalization ratio was a horrifying 99.6%. Post-transaction close, the company stands to have reduced its debt-to-cap to 81%.
The assets being foreclosed upon by Wachovia include: Massey Preserve, raw land located in Raleigh, North Carolina; Haddon Hall, a condominium project in Raleigh, North Carolina; Holland Farm, a development project in Raleigh, North Carolina; Wakefield Plantation, a single family project in Raleigh, North Carolina; Riverbrooke, a single family project in Raleigh, North Carolina; Wheatleigh Preserve, a single family project in Raleigh, North Carolina; Brookfield Station, a single family project in Raleigh, North Carolina; Providence, a single family project in Raleigh, North Carolina; Allyn's Landing, a development project in Raleigh, North Carolina; Allen Creek, a single family project in Atlanta, Georgia; Arcanum Estates, a single family project in Atlanta, Georgia; Falling Water, a single family project in Atlanta, Georgia; James Road, a development project in Atlanta, Georgia; Tribble Lakes, a development project in Atlanta, Georgia; and Summerland, a condominium project in Woodbridge, Virginia.
This most recent debt deal follows a series of similar moves to lighten the company's heavy debt load. Since September 2008, the company has restructured approximately $82.5 million in debt:
September 2008: The company worked out two separate deals with Regions Bank and BB&T to swap assets for $5.3 million and $32.7 million in debt, respectively.
December 2008: In early December, the company agreed to allow Bank of America to foreclose on three Atlanta projects in exchange for $8.8 million in debt. Later that month, the company inked another deal, this time with Wachovia, to restructure $22.2 million by redistributing it across three new loan facilities.
January 2009: The company entered into a forbearance agreement with Guggenheim Corporate Funding on $13.5 million outstanding on a project loan.
However, whether the progress will prove to be too little too late is still up for debate. In addition to its debt problems, the company's cash position is precarious; it's got just more than $1 million on its books. Moreover, there's been some instability in the management ranks; in mid-May, CFO Bruce Labovitz left the company. Not to mention operationally the company is struggling. For 2Q2009, the company reported a net loss of $27.7 million, or $1.58 per share, on revenues of $3 million, which were down 75% year over year.
However, in a statement, Comstock chairman and CEO Chris Clemente said the most recent restructuring was a move in the right direction.
"We are very pleased to have finalized an agreement with Wachovia that will reduce the balance due to Wachovia from approximately $17.8 million to approximately $425,000 while also facilitating delivery of certain backlog units," he stated. "While we have not finalized all agreements regarding our effort to restructure all of our debts, this is a critical step forward. We remain focused on reaching similar amicable agreements with our other secured lenders, and we will continue to take the steps necessary to position Comstock for a return to profitability as market conditions improve."