Orleans Homebuilders amends revolver, upping land owed to net worth ratio

By Angela McDaniels

Seattle, Nov. 3 - Orleans Homebuilders Inc. amended its $650 million revolving credit facility due 2009, increasing the maximum permitted ratio of all land owned that is not subject to a qualifying agreement of sale and on which no unit has been or is being constructed to the company's consolidated adjusted tangible net worth to 1.85 to 1 from 1.75 to 1 through Dec. 31, according to an 8-K filing with the Securities and Exchange Commission.

The maximum permitted ratio will become 1.75 to 1.00 for March 31 through June 30, 2007; 1.65 to 1 for Sept. 30, 2007 through Dec. 31, 2007; and 1.5 to 1 from March 31, 2008 through Dec. 31, 2008.

The company's ratio reached 1.77 to 1 on Sept. 30, and the amendment was obtained on Nov. 1.

In addition, under the amendment:

• The required debt service ratio was reduced to 2.25 to 1 at Sept. 30 from 2.25 to 1 for the entire term of the revolver, 2 to1 at Dec. 31; 1.65 to 1.00 at March 31; 1.5 to 1 at June 30, 2007 through Dec. 31, 2007; 1.65 to 1.00 at March 31, 2008; and 1.8 to 1 at June 30, 2008 through Dec. 31, 2008.

In addition, the company's debt service ratio must be greater than or equal to 1.75 to 1 as of the last day of at least two fiscal quarters in each rolling period of five consecutive quarters, beginning with the period of five consecutive fiscal quarters ended Sept. 30;

• The definition of "debt service" included in the calculation of the debt service ratio was modified to exclude the repayment of the $5 million note issued to the former owners of Realen Homes;

• The non-default variable interest rate spread increased by 25 basis points when the company's debt service ratio is less than 2.25 to 1. The variable interest rate spread is now 1.65 to 2.5;

• The permitted minimum consolidated tangible net worth was reset to 90% of the company's consolidated tangible net worth at Sept. 30 plus an amount equal to 50% of the net income earned during each fiscal quarter that ends after Sept. 30 and all of the net proceeds of equity securities issued by the company after Sept. 30.

In addition, the definition of consolidated tangible net worth was modified to exclude any intangible assets recognized in connection with the company's supplemental executive retirement plan;

• The required financial metrics that allow for the unsecured election provided under the first amendment were raised to a leverage ratio that is less than or equal to 2 to 1, a debt service ratio that is greater than or equal to 2.25 to 1 and a ratio of all land owned which is not subject to a qualifying agreement of sale and on which no unit has been or is being constructed to the company's consolidated adjusted tangible net worth that is less than or equal to 1.25 to 1.

Wachovia Bank NA is the administrative agent for the revolver.

Orleans Homebuilders is a Bensalem, Pa.-based developer, builder and marketer of single-family homes, town homes and condominiums.

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