Orleans Homebuilders Announces Third Limited Waiver Letter And Limited Unaudited Financial Information

BENSALEM, Pa., Feb. 1 /PRNewswire-FirstCall/ -- Orleans Homebuilders, Inc. (the "Company") (Amex: OHB) announced that on January 25, 2010 the Company executed a third limited waiver letter (the "Waiver Letter") to its $375 million Second Amended and Restated Revolving Credit Loan Agreement dated September 30, 2008 (as amended, the "Credit Facility").  This Waiver Letter effectively amends the definition of "Borrowing Base Availability" to reflect the borrowing base certificate filed on December 15, 2009 (as of November 30, 2009) throughout the Third Limited Waiver Extension period.  In addition, under the terms of the Waiver Letter, the Credit Facility size was reduced from $375 million to $350 million, the maximum cash covenant was reduced from $12 million to $10 million, and the lenders were granted a security interest in certain additional collateral.  Lenders holding approximately 68% of the commitments under the Credit Facility approved the Waiver Letter.  In addition, on January 29, 2010, the waiver period provided for in the "Second Amendment Extension Letter" dated December 18, 2009 was extended to February 12, 2010, but such period remains subject to potential earlier termination as a result of certain events.

The Company continues to work actively with members of its bank lending group to obtain a maturity extension to its Credit Facility.  As previously announced, on December 8, 2009, the Company and certain of its lenders agreed to a non-binding term sheet (the "Term Sheet") relating to a maturity extension and structural modifications (the "Amendment") of the Credit Facility.  

The Amendment generally contemplates significant structural and covenant changes to the Credit Facility, including a maturity extension to December 2011; the granting of additional collateral; certain material step-down requirements in the size of the Credit Facility which principal step-downs are generally coincidental with the required material land asset sales over the next six to 18 months, with the application of the net proceeds from the build-out and sale of work-in-process housing units over the next approximately nine months in certain of the communities that may be sold without the construction of new spec units in these specific locations, and future federal tax refunds.  The anticipated asset sales may include substantially all of the Company's undeveloped land positions as well as certain other positions, which are to be sold, over up to the next 18 months, but primarily over the next 12 months.  The Amendment is also expected to prohibit future site improvement expenditures related to these designated land positions; limit significantly the acquisition of new lots and land; and enable completion of existing work-in-process housing inventory units in many of such communities without new spec unit starts in certain specific locations. It is anticipated that the Amendment will also prohibit the construction of new work-in-process housing units in all communities approximately six to eight months prior to the new December 2011 maturity date.  The Company currently expects that such asset sales will result in material financial losses, both relative to book value reflected on the March 31, 2009 Quarterly Report on Form 10-Q (the latest financial statements that the Company has filed with the SEC) and to existing bank borrowing base value, respectively, of such assets.  The Amendment provides for a potential significant principal reduction or debt forgiveness by the lenders if the Company can either retire or refinance the entire restructured Credit Facility, or if the Company can recapitalize or sell the Company primarily within the next six to 12 months following the ultimate closing date of the Amendment, although realization of any principal reduction or debt forgiveness is subject to significant conditions, including recapture by lenders, as to which the Company can offer no assurance of satisfaction.  The Company believes that the Amendment should provide the Company with adequate liquidity to continue its operations in the near term, but generally not beyond approximately six to 12 months beyond the closing date of the facility under this Term Sheet, if any.

The Company continues to pursue other strategic alternatives including a potential sale or recapitalization of the Company, and has presented potential transaction alternatives to its lending group. There can be no assurance that the Company will be able to consummate any transaction on terms acceptable to it, and any such transaction may provide little or no value for either the Company's unsecured creditors or equity holders, or may result in substantial dilution to the Company's equity holders.