TOUSA expects to pay off $200 million portion of settlement term loan in 2008

By Jennifer Lanning Drey

Portland, Ore., Aug. 9 - TOUSA Inc. (formerly Technical Olympic USA, Inc.) believes it will generate enough cash through planned asset management initiatives to pay off most, if not all, of its $200 million first-lien term loan by the end of 2008, Stephen Wagman, TOUSA's chief financial officer, said Thursday during the company's second-quarter earnings call.

The first-lien term loan is contained under the $500 million senior secured credit facility used to finance TOUSA's Transeastern joint venture global consensual settlement, which closed Aug. 1.

"We understand the need to reduce debt and we believe we have the right strategy in place and management resolve to reduce this debt closer to our historical range of 45% to 55% [net debt to capital]," Wagman said.

TOUSA's net debt-to-capital ratio was 65.4% at the end of the second quarter.

In the second quarter ended June 30, the company used $31 million in operating activities, compared with a use of $19 million in the second quarter of 2006. The increased cash use was due to a decline in profitability before non-cash impairment charges during the 2007 quarter as compared to the 2006 quarter, according to a company news release.

The company's pro-forma availability under its amended revolving credit facility at June 30 was $350 million.

As previously reported, TOUSA amended its existing $800 million revolving loan facility to reduce the revolving commitments by $100 million and allow for the $500 million in new term loans created in the Transeastern settlement.

Company executives on the call said that while the Transeastern settlement increased debt, it is also likely to lead to improvements in the future.

"We believe the settlement eliminates significant uncertainties regarding the company and removes a major distraction from our day-to-day business," TOUSA chief executive officer Antonio Mon said during the call.

Deleveraging initiatives

TOUSA is executing a comprehensive deleveraging plan consisting of initiatives including possible asset dispositions, such as the sale of underperforming assets, communities, divisions and joint ventures.

The plan also looks to reduce costs throughout the organization, limit new land acquisitions, engage in bulk sales of land and unsold homes, reduce the number of homes under contract and re-negotiate or abandon rights under optional contracts.

Additionally, in the second half of 2007, the company plans to begin winding down certain assets under a portion of the plan expected to generate more than $200 million in after-tax cash over the next two years, Wagman said.

Difficult second quarter

Mon said TOUSA's second-quarter results reflected the difficult transition to a more normalized market environment in the housing market.

The company reported a net loss of $132 million for the second quarter, compared with net income of $67.6 million in the same period of 2006.

"We are struggling as an industry to pinpoint where the bottom is and when the recovery will take place," Mon said.

"We are managing our company under the assumption that housing conditions will remain challenging for some time to come."

Technical Olympic is a Hollywood, Fla., designer, builder and marketer of single-family residences, town homes and condominiums.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.