Building Materials Holding Corp. announced today, Aug. 4, that it will close its SelectBuild Florida subsidiary over the next four months. The move, which affects roughly 140 employees at shell, truss, and stair operations, comes less than a week after the San Francisco-based firm revealed it has been discussing with its lenders a temporary waiver on minimum net worth and earnings standards.
"In light of the challenging homebuilding environment, we recognize the need to realign our business across the country to reflect local conditions," Stanley M. Wilson, BMHC's president and chief operating officer, said in a statement. "The closure of the SelectBuild Florida facilities is in direct response to the challenging business environment in Florida. The Florida market has weakened considerably and we anticipate it will be some time before improvement is seen. Housing starts in the Florida market have dropped from a peak of 265,000 in 2005 to only 99,000 in 2007 and an estimated 61,000 in 2008."
SelectBuild added that it intends to complete all construction in progress and fulfill all outstanding contractual obligations during the four month wind-down period.
BMHC, the fifth-biggest company on the 2008 ProSales 100, is much more closely tied to production builders than other pro-oriented dealers. In May, reported its loss deepened to $33.9 million vs. $5 million in the same period a year ago, while first-quarter sales sank 37% to $355 million from a year-earlier $559 million. It will announce its second-quarter results on Aug. 14.
On May 12, BMHC announced it would merge its BMC West and SelectBuild units in an attempt to streamline services that it estimates will save $20 million to $25 million annually. A few days later, it closed its SelectBuild Arizona unit as well as its facilities in Merced and Bakersfield, Calif.
On July 29, the company said its preliminary second-quarter results indicated it was out of compliance on a revolving loan for which $29 million is outstanding and a term loan on which BMHC owes $340 million."Failure to comply with these covenants constitutes an event of default under the credit facility. As a result, the lenders under the credit facility will have the right to cause all amounts borrowed to become due and payable immediately and cease further borrowings by the company under the credit facility," the company said.
"BMHC has been discussing with its lenders a temporary waiver of these covenants, in order to preserve access to liquidity under the credit facility, and an amendment to the credit facility to better reflect current market conditions," BMHC's July 29 statement said. "There is no assurance these negotiations will result in a waiver and an amendment acceptable to BMHC and the lenders. However, BMHC currently expects that it will reach agreement with its lenders on both the appropriate waiver and the amendment in a timely manner and that its business operations will not be affected."
As a result of the announcement, Standard & Poor's Ratings Services said it placed its "B-" corporate credit rating on BMHC on negative watch.
Craig Webb is editor of ProSales magazine.