Sept. 29 may be a day that will live in infamy on Wall Street as the Dow Jones plunged 700 points, but for executives at Orleans Homebuilders, it was an occasion for an early Thanksgiving celebration, plus a little bit of pride.

Management at the Bensalem, Pa.-based home building company finally sealed a deal with its lenders, after a series of extensions, to amend critical financial covenants related to its revolving credit facility. Moreover, the company showed some balance sheet improvement as it posted its fourth quarter and fiscal 2008 year-end results. The news bolsters the struggling company's outlook through December 2009.

"Was I nervous about what was going on with financial institutions? Yes," said executive vice president and CFO Garry P. Herdler, referring to the market's plunge following the failure of the U.S. Treasury's bailout plan to pass the House as well as Citigroup's buyout of Wachovia. "Did we hold it together? Absolutely."

In fact, Herdler said the recent instability in the financial markets had zero effect on the deal's terms. "The term sheet agreed to on Sept. 11 was the deal we closed. We appreciate the support of our lenders," he said.

The new amendment eliminated several financial covenants related to leverage, debt serviceability, and units in inventory. It also decreased minimum liquidity, cash flow coverage, and tangible net worth requirements.

Those changes were critical to the company. It was at risk of falling out of compliance with some of the facility's terms following a $43.5 million deferred tax charge during its fiscal third quarter, ending March 31. The company obtained a waiver on May 9 related to those covenants, which, after an extension, was set to expire on Sept. 30; without another waiver extension or an amendment, the company would've been in default.

Moreover, as part of the amendment, the company negotiated a reduction in the size of its facility in a two-part move that pleased the facility's bank participants.

First, the company was looking at having $121 million of its $585 million credit facility mature on Dec. 20. However, Orleans management negotiated with the five banks behind the $121 million to extend the maturity date by one year to when the remaining $464 million of the facility would mature.

The extension allowed management to move to reduce the total size of the $585 million revolver by 25% to $440 million, providing all 17 banks--rather than just the five--with an equal reduction in commitment. However, it should be noted that the reduced revolver shrinks and expands, not to exceed $440 million, in concert with seasonal operating needs.

Yet another positive coming out of the amendment is that following early lender-initiated appraisals of a number of projects, the company's overall borrowing capacity would have increased by roughly $2.7 million had the appraisals gone into effect on Aug. 31. Herdler noted that the company's borrowing capacity is still subject to change, as the appraisers have more to work through; the current increase in available funds is based on appraisals of projects that account for approximately 35% of its borrowing base. However, Herdler said management was "pleasantly surprised" by the increase.

"It didn't go up a lot," he said. "But the more important thing is it didn't go down."

And improving the strapped company's financial position is management's No. 1 priority.

Results for the company's most recent quarter--its fiscal 4Q2008--showed decent progress toward that end, despite a net loss of $34.2 million, or $1.86 per share, and impairment charges of $20 million. Revenues held up well compared to the same period a year ago, dropping 7% year-over-year to $189.3 million on the delivery of 433 homes. New orders and backlogs were down year-over-year 28% and 25%, respectively. Cancellation rates came in at 25% for the quarter.

Management continued to pare down its lot pipeline, reducing its total controlled lots to 7,229 at quarter from 10,503 a year ago. Of those controlled lots, roughly 1,847 are optioned.

Moreover, the company took additional steps during the quarter to further lower its net debt by $53.3 million, a move that contributed to a total 30% reduction in debt since January 2007.

In the earnings press release, chairman and CEO Jeffrey P. Orleans stated, "Despite these near-term challenges, we continue to focus on successfully operating though these turbulent times. As we have successfully demonstrated during this past year, we remain diligent on our stated objectives to reduce our debt while maintaining our liquidity, improving our balance sheet, and reducing our cost structure."

The company will host an earnings call tomorrow at 10:00am EDT, which can be accessed at