WCI Communities is offering its creditors a sweeter debt deal to back off on their demands to be repaid early.

The Bonita Springs, Fla.-based public builder has said it doesn't expect to have the cash to pay off $125 million in notes that the bond holders have said they intend to exercise their rights to cash in on Aug. 5.

Late Tuesday, July 9, WCI offered to swap out the $125 million in 4 percent contingent convertible senior subordinated notes due in 2023 for $125 million in 16 percent senior secured notes due 2013.

At four times the interest, a payback in five years, and what appears to be a better securitized position, the company is betting the note holders will bite. It will take 95 percent approval for the deal to work. And if it doesn't, there's not much margin for error. The offer expires at 12 a.m. on Aug. 5, when the existing debt becomes payable in full.

At the end of its first quarter, WCI CEO Jerry Starkey warned that with less than $70 million in cash on hand, $1.6 billion in debt, and stripped of its goodwill, WCI might not be able to pay off the $125 million in convertible notes if the lenders exercised their right to be repaid in full on Aug. 5.

Plagued by cancellations in its high-rise condominiums as well as its single-family homes, the company lost more than $578 million last year. And its prospects for generating cash seem slim in the near term as demand for its products is nearly nonexistent. Generating cash through land sales doesn't look promising either.

There has been speculation that Carl Icahn, owner of more than 14 percent of WCI Communities' stock and its chairman, may end up as the company's white knight. The billionaire investor recently filed an SEC report announcing he is talking with a "special committee" formed by the company to look at its options for restructuring.

"Such discussions may ultimately lead to reporting persons (Icahn) entering into a transaction with the issuer (WCI)," the filing said.

Icahn was viewed as a black knight a year ago when he swooped in stating he intended to maximize the company's value, buying nearly 15 percent of the company's stock, and offering to buy the company's stock at $22 per share. WCI responded by adopting a poison pill provision to impede takeovers and shopping the company out to other buyers.

No buyers came forward; Icahn revoked his $22 tender offer and then started insisting on board membership. He ended up with three slots, including the chairmanship.