Orleans Homebuilders amends 8.61% trust preferreds

New York, Aug. 13 - Orleans Homebuilders, Inc. said it amended its $75 million of 8.61% trust preferred securities issued by Orleans Homebuilders Trust II.

"This amendment allows Orleans Homebuilders to put the operational distraction of these previous covenants behind us," said Jeffrey P. Orleans, chairman and chief executive officer, in a news release. "Along with improvements for Orleans Homebuilders in the covenants and financial terms of these notes, this amendment generally eliminates the potential for a trust preferred default that could be caused by paying the higher adjusted interest rate until calendar year 2010."

Under the changes, the potential start of the adjusted interest rate that is 3% higher than the regular rate is delayed four quarter so that it will not apply until the coupon due on Oct. 30, 2008, at the earliest.

In addition, in order to cause an event of default, the adjusted interest rate will have to be in effect for at least eight consecutive quarters - or, in some cases, six - rather than four.

The definitions of "adjusted EBITDA," "consolidated net income" and "debt service" have been amended or added as they apply to the interest coverage ratio that determines whether the additional interest is payable.

The optional redemption provisions have been amended and a provision for legal and covenant defeasance has been added.

Conditions to the changes include Orleans, through its OHI Financing, Inc. subsidiary, establishing by Sept. 30 a $5 million reserve fund by posting a letter of credit or cash with the trustee.

Orleans is a Bensalem, Pa., homebuilder.

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