Standard Pacific Homes may not be selling any more houses than it did a year ago, but its financial situation has stabilized considerably.
On Oct. 30, 2008, the company reported a $368.8 million loss during its third quarter conference call. It had serious debt coming due in 2009 and each year for several after that. And its debt to equity had climbed to 67%, bordering on triggering debt covenant violations.
One year later to the day, an almost completely different executive team announced the company lost $23.8 million in the third quarter and had completely reorganized the company's finances, considerably reducing its debt and pushing back the due dates on much of the rest.
Since MatlinPatterson Global Advisors pulled the company from the brink of bankruptcy in June 2008, infusing it with cash, Standard Pacific's home building debt has been reduced from $2 billion to $1.27 billion. Its debt due before 2013 has been reduced to $322 million from $1.3 billion. And it now has $533 million in cash on hand compared with $204 million.
"One of the things I don't worry about any more is a massive operational reorganization like we did in the first quarter," said CEO Ken Campbell, who was put in place by MatlinPatterson in December.
"I don't spend much time, if any, on debt restructuring," Campbell continued. "And on joint-venture exposure, we don't even have meetings on it anymore. When I got here, that was a different story."
Still, Campbell was less than content with the company's recent earnings.
"At the end of the day, if you exclude all the noise, we lost a little money instead of making a little money," Campbell said. "That's not a good trend, and we need to turn that around. I think there might be some improvement on the horizon, but not a lot."
So the company is putting in place a business plan that should have the company downsized to the point where it can operate without losing money even if the market doesn't improve.
"I think it's going to be another tough year," he said. "If it turns out to be better than we thought, then I think we won't suffer by preparing for a tough year."
Whatever happens with the market, Standard Pacific is planning to buy more land. The recent restructuring of the company's debt will allow it to spend between $300 and $400 million on new, less expensive land. Already the company has put out letters of intent bidding on $300 million worth.
"I wouldn't get too scared of the number," said Campbell, adding the percentage of letters of intent that are accepted is small.
"It's an indication that there's lots of stuff to look at, but it's not a good indication of what we actually are going to spend," he said. "I think the banks [that own the land] are definitely starting to stick their toes in the water. ... I think some of the initial sales by some of the banks didn't turn out to be so disastrous so that is bringing them a little bit out of the woodwork."
Campbell said it will only buy parcels it estimates will bring returns of at least 20% and preferably 25%. "We just won't buy it [otherwise], and we don't need to buy it. Anything we buy will pull our margins north of 20%, it's just a question of how far north of 20%.
