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Liquidity Issues Pulverize Tarragon

Tarragon (TARR) finally admitted to liquidity issues and said it may not be able to continue as a going concern, giving additional weight to short-sellers' claims that the small-cap homebuilder may be forced into bankruptcy.

Shares recently were plunging 92% to 62 cents -- a far cry from the $12 they were going for at the start of this year. reported in April about short-sellers' belief that Tarragon was facing a looming liquidity crisis .

The stock was halted for trading Thursday after shares fell more than 50% earlier, on more than 12 times the stock's daily average. Shortly after the halt, Tarragon released a statement saying it would delay its latest quarterly filing because it is "currently experiencing liquidity issues caused by the sudden and rapid deterioration in the real estate credit markets."

The troubles have resulted in Tarragon being unable to complete approximately $50 million in financing transactions that had been under negotiation and were expected to close in August 2007, the company said.

The company also said it had not made its August debt-service payments, along with certain other vendor payments.

The problems obtaining loan modifications and additional financing "have materially affected Tarragon's liquidity, including the ability to repay existing indebtedness as it becomes due and meet other current obligations, and raise doubt about Tarragon's ability to continue as a going concern," the company said.
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