It has taken almost two years, and will require the home builder to take out $500 million in debt from Citibank, but TOUSA, Inc. is on the verge of acquiring outright the assets of its Transeastern Joint Venture, which in 2005 bought the assets of Transeastern Properties, Inc.
The settlement, announced Friday, resolves disputes that occurred between Hollywood, Fla. -based TOUSA and its partners in a joint venture to buy the assets and operations of Transeastern in August, 2005, as well as between TOUSA and lenders who backed the deal. TOUSA expects to close the global settlement by July 31, the company said in a statement.
Once complete, the Transeastern JV along with an additional 7,500 homesites, will be rolled into Engle Homes, one of TOUSA's home building brands operating in Florida.
"This global settlement enables TOUSA to put the Transeastern JV issue behind us and removes the uncertainty and distraction of a prolonged litigation," said Antonio Mon, president and CEO of TOUSA in a statement.
In the statement, the company said the terms of the deal call for TOUSA to pay $422.7 million, including interest, to its primary lender. TOUSA will issue other lenders $20 million in notes due in 2015, as well as preferred stock carrying an aggregate liquidation preference of $117.5 million. TOUSA will issue additional lenders warrants to purchase TOUSA common stock, carrying a value of $16.25 million, the company said.
The company also stated that it anticipates the settlement will increase its total losses brought on by the Transeastern JV by roughly $38 million from the $354.3 million the company estimated in its fourth quarter report.
"We intend to take aggressive action to reduce our debt, and while this will not happen overnight, we are prepared to take the necessary steps to strengthen the company's capital structure and position it for the future," Mon said in the statement.
TOUSA, along with partners The Falcone Group, formerly majority owners of Transeastern Homes, based in Coral Springs, Fla., formed a joint venture to purchase the assets of Transeastern in the summer of 2005, with each side receiving 50 percent voting interest. The deal, reportedly worth $857 million, was first announced on August 1, 2005, and left TOUSA as the managing member of the venture.
To fund the purchase, the joint venture partners borrowed $675 million from Deutsche Bank, while TOUSA contributed $90 million of equity, and the Falcone Group contributed another $75 million, according to TOUSA statements.
In late 2006, Deutsche Bank sent letters to TOUSA demanding payment of debts, alleging potential and actual defaults, according to TOUSA's 2006 year-end financial statement.
Read the agreement: http://phx.corporate-ir.net/phoenix.zhtml?c=116478&p=IROL-news
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