In the wake of Thursday's news that its board has appointed a new CEO, Standard Pacific Corp. issued another release Monday, March 24, which stated that its bank group has given it another reprieve to renegotiate the debt covenants it is violating. The company has another 45 days--until May 14--to reach an agreement with its bank group. The waiver of default was scheduled to expire March 30.

The Irvine, Calif.-based company said during its February earnings call that it was violating tangible net worth requirements on several of its loans, blaming the problem on having to take a $180.5 million FAS 109 deferred tax valuation allowance charge.

As a result of the most recent waiver, Standard Pacific's revolving credit facility maximum was decreased from $900 million to $700 million. As of last Friday, March 21, the company had borrowed $90 million from the revolver and had $49 million in letters of credit outstanding.

In other news, Standard Pacific said it has made another payment on its 6% senior notes that are coming due in October, putting in another $22 million, which should lower the outstanding amount to $104 million. In the last quarter of '07, it made a $24 million payment on that same note.

Standard Pacific's significant debt, roughly $1.6 billion that comes due between this year and 2015, has been a thorn in its side, causing analysts and other industry watchers to question its ability to repay it during the significant market downturn.

Indeed, the company's executives themselves have opened the door to doubt, calling the debt "significant" and providing caveats in the builder's annual report that if it isn't able to renegotiate its debt terms and the loans are called it might not be able to repay it all.

Still, Standard Pacific has made good strides toward paying off its debt and improving cash flow despite the fact that most of its operations are in the hardest hit states of California, Florida, Arizona, and Nevada.

The company has reduced its debt by $248 million, re-margined $46 million of joint venture obligations, and received $235 million in tax refunds from past earnings based on net operating losses last year.

During its most recent conference call, and the last public forum for former CEO Stephen Scarborough before his sudden retirement was announced last Thursday, March 20, Scarborough expressed optimism that the company would not only be able to meet its debt obligations but report a positive cash flow during 2008 as well.

That progress was one reason Scarborough's sudden replacement by Jeffrey V. Peterson, formerly the lead independent director of the company's board, seemed to cause such surprise among both employees and analysts.

While most analysts speculated that the change in command had nothing to do with a potential bankruptcy filing or sale of the company, Raymond James released a report today, March 24, asserting that it probably was not good news.

"We can think of several potential explanations, ranging from personal differences to highly significant financial and strategic crossroads," stated the report, which then went on to speculate about the possibilities including:

1) Scarborough was not paid any bonus for 2007, after receiving a $4.4 million bonus for 2006 even though he had a specified bonus of 2.25% of company pre-tax income.

The report cited "inconsistency in executive bonus hurdles. For example, CFO Andy Parnes was paid a $1.6 million bonus for 2007, based largely on discretionary criteria established by the board."

2) "The board may have disagreed with recent decisions to sell potentially important and strategic land parcels in order to bolster liquidity and cash flow. Protecting the company's land assets against further sales into a very weak market for land may require additional negotiations with lenders and may potentially alter the company's longer-term liquidity situation if certain assets are deemed 'off the table.'"

3) "The board may have other opinions with regard to the potential issuance of dilutive new equity in order to accelerate de-levering of the balance sheet and to eliminate certain joint venture obligations.

"The financial situation of certain joint ventures may have deteriorated meaningfully in recent weeks, as the credit crisis seems to have worsened and lenders are increasingly tightening the screws on outstanding residential construction loans.

"As of Dec. 31, Standard Pacific's joint ventures held an aggregate of $771 million of debt outstanding, of which the company was either solely or jointly responsible for as much as $409 million, plus a likely $45-55 million of additional re-margin requirements."