Oakwood has liquidity to repay reset debentures, plans new credit facility

New York, Dec. 31 - Oakwood Homes Corp. said it has adequate liquidity to meet its obligations, including the possible need to repay its reset debentures in June 2002, despite a sharp downturn in the manufactured housing market.

The Greensboro, N.C. company also said in a filing with the Securities and Exchange Commission that it intends to take out a new credit facility in 2002, primarily to support letters of credit.

Interest on Oakwood's 8% reset debentures due 2007 will be redetermined on June 1, 2002. At that time, the holders can put the notes for redemption or Oakwood can call them at par. As of Sept. 30, 2001, the company had $16.2 million of the notes outstanding, down from $16.8 million a year earlier, according to the SEC filing.

Operating cash flow, Oakwood's continued access to the asset-backed securities market and borrowings under the credit facilities will provide sufficient liquidity to repay the reset debentures, if necessary, as well as to meet the company's other obligations and allow it to execute its business plan, Oakwood said in the SEC filing.

Although manufactured housing shipments fell 26% industry-wide in the first 10 months of calendar 2001 and Oakwood reported a net loss of $176 million for the year to Sept. 30, 2001, the company said it plans to continue to manage operations to generate a positive cash flow. Plant and sales center closing, curtailed production schedules and competitive pricing to cut inventory have, however, hurt earnings and a loss is also expected for 2002.

In 2001, Oakwood said it generated $47.5 million of cash from operating activities, principally as a result of a $94.4 million reduction in inventories and selling substantially all the subordinated asset-backed securities rated below BBB that had been retained from prior securitizations. Sales of these subordinated securities was finalized during the fourth quarter and generated $72.9 million of cash.

Oakwood also retired its $75 million revolving credit facility, scheduled to mature in October 2001, receiving $9 million of cash held in a collateral account. Selling the subordinated ABS and the release of cash more than offset the $75 million available under the revolver.

Currently Oakwood has two credit facilities. In the second quarter of 2001, it took out, via a special-purpose unit, a $200 million three-year loan purchase facility to fund up to 81% of qualifying loan principal balances held for sale. This facility replaced the previous $250 million facility with a commercial paper issuer, scheduled to expire in October 2001. Under the new facility, Oakwood issued a warrant to a company related to the lender valued at $11 million to acquire 1.9 million shares at $9.84 per share. The warrant is immediately exercisable and expires in February 2009.

In October 2001, another special-purpose unit entered into a $50 million servicer advance facility with an institutional investor, Oakwood said in the SEC filing. The facility matures in August 2003 and provides an additional source of funding for loan servicing advances, one of the principal uses of the retired revolver.

Oakwood said it plans to negotiate an additional credit facility during 2002, a major use of which will be to support outstanding letters of credit that continue to be provided by a lender which participated in the retired revolver. The current letter of credit arrangement matures in October 2002.

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