WCI Communities, which has been in default on covenants for two of its loans since September 2007, has bought itself another month from its creditors while it renegotiates better terms on its senior revolving credit and term loan agreements.

The company now has until Jan. 7, 2008, to reach an agreement on terms that would give the company more financial flexibility, including modifications to some of the fixed charges.

"During the extended waiver timeframe, we expect to finalize discussions regarding the anticipated longer-term amendment that would provide financial flexibility, including modification of the fixed charges coverage covenant, and obtain approval of lenders participating in these facilities," the company's announcement said.

However, there's not 100% certainty that an agreement will be reached. If negotiations fail, the company's solvency will be in question. The seriousness of its credit situation was outlined at the bottom of its third-quarter earnings report released Nov. 8 in advance of its quarterly conference call.

"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 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 will 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 might not appear, "which could impair our ability to maintain sufficient working capital," the release warned. "Either situation could have a material adverse affect on the solvency of the company."

WCI has little cash on hand to make up for a loss of credit. At the end of September, it had $7.1 million on hand, compared to $41.9 million at the end of September 2006.

During the company's last conference call, CFO Jim Dietz said he is hopeful that the negotiations will be successful. "We are not that far apart with the banks," he said. "We think we can wrap up the negotiations quickly...If that doesn't turn out to be the case, there are alternatives. Certainly, our new board of directors includes groups that have substantial free cash flow that might become available to us."

Dietz was referring to billionaire financier Carl Icahn who owns a large share of the company and was, along with some of his representatives, recently elected to the company's board.