Orleans Homebuilders amends revolver, eliminating leverage covenants, lowering size to $440 million

By Angela McDaniels

Tacoma, Wash., Sept. 30 - Orleans Homebuilders, Inc. said it amended its revolving credit facility, decreasing the minimum liquidity covenant, cash flow coverage ratio and minimum consolidated tangible net worth covenants.

The amendment eliminated some financial covenants, including both of the previous leverage covenants, the debt service covenant and the units-in-inventory covenant, according to a company news release.

In addition, banks holding about 21% of the facility's total commitments agreed to extend the maturity date to Dec. 20, 2009 from Dec. 20, 2008.

In connection with the changes, the interest rate was increased to Libor plus 500 basis points from Libor plus 400 bps and the size of the facility was reduced to $440 million from $585 million - except that the amount of the revolver availability will be $425 million from the closing date through Dec. 31 and $415 million from July 1, 2009 through Dec. 20, 2009.

On May 9, the company received a limited waiver that covered non-compliance with some covenants and replaced those covenants with modified covenants. The waiver expired on Monday.

Appraisals

As part of the waiver agreement, the bank lenders engaged appraisers on behalf of the lenders for communities making up roughly 35% of the company's borrowing base availability as of May 31.

When it received the waiver, the company said that if the appraisals resulted in a determination that a material amount of the assets in the company's borrowing base have a value lower than the cost and the existing appraised values, the net availability under the credit facility could be materially reduced from existing or anticipated levels. The company could also be required to repay a portion of the amount outstanding under the credit facility.

On Tuesday, Orleans said the results of the appraisals included both individual reductions as well as some increases in appraised values of projects. The company estimated that these changes would have resulted in a net increase in borrowing base availability of about $1.5 million as of June 30 and a net increase of about $2.7 million as of Aug. 31.

Additional appraisals are expected to be completed over the next three fiscal quarters ending June 30, 2009. Orleans said the results of these appraisals are subject to numerous factors and gave no assurance on the results of the recent or future appraisals and the corresponding liquidity impact to the company.

Orleans Homebuilders is a Bensalem, Pa.-based residential homebuilder.

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