WCI in credit facility default after failure to give notice that liquidity requirement was met

By Sara Rosenberg

New York, July 29 - WCI Communities Inc. is currently in default under its revolver, term loan and tower construction loan agreements as a result of being unable to provide notice on July 22 to its lenders that it met the minimum liquidity requirement, according to a news release.

The company did have the minimum required liquidity in cash and available commitments of $150 million on a pro forma basis giving consideration the impact of satisfying the repayment of notes due on Aug. 5 for cash.

As a result, the company's access to additional liquidity under the revolver has been suspended pending the resolution of this repayment obligation and completion of a proposed credit facility amendment.

As was previously reported, WCI is looking to amend its revolver and term loan simultaneous with the consummation of an exchange offer for its $125 million of 4% contingent convertible senior subordinated notes.

Under the revolver amendment, about $243.3 million will cease to be available and will be payable in full on the revolver's maturity date of June 11, 2010.

The revolver will have $150 million of availability and up to $100 million of that amount will be available for letters of credit.

Under the term loan amendment, about $132.3 million will remain outstanding, which will mature and be payable in full on Dec. 23, 2010.

Pricing and fees on the revolver and the term loan are expected to increase with the amendment. Revolver and term loan pricing is expected to go up to Libor plus 625 basis points from Libor plus 525 bps and the unused fee on the revolver will be increased to 50 bps from 25 bps.

Financial covenants under the amended revolver and term loan are expected to include a minimum ratio of appraised asset value to loans of 2.0 to 1.0. In addition, at least one of the following tests will have to be satisfied: minimum ratio of EBITDA to fixed charges of 0.5 to 1.0, minimum ratio of cash flow from operations to cash interest expense of 1.0 to 1.0 or minimum liquidity of $50 million.

The convertible exchange offer is subject to, among other things, a 90% minimum tender condition, the completion of the amendment and restatement of the company's credit facility and the issuance of $375 million of new secured second-lien notes.

The new notes will be used to repay the company's tower loan agreement in full and the existing credit facility pro rata between the term loan and the revolver.

In addition, WCI said on Tuesday that its credit facility lenders are currently obtaining appraisals on its properties in the borrowing base, and while only a portion of those appraisals are complete, in some cases the appraisals reflect values that are lower than book value, which will further limit the revolver borrowing base capacity.

Furthermore, these lower-than-expected appraisal values could potentially trigger a mandatory repayment obligation in future periods.

So far, the company has received appraisals on assets totaling about $700 million, of which aggregate appraisal values exceed 95% of book value.

WCI is a Bonita Springs, Fla.-based homebuilding and real estate services company.

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