Bankruptcy Fears Bulldoze WCI Communities

Shares plunge on a negative S&P note. Other homebuilders follow suit.
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Shares of

WCI Communities

(WCI)

plunged nearly 30% Wednesday as investors feared a bankruptcy at the Florida condo developer.

The decline came after Standard & Poor's issued a note maintaining its junk rating and negative outlook on the company. The agency pointed out that the homebuilder faces "acute liquidity challenges."

"These challenges include the need to negotiate more liberal terms governing a $700 million secured revolver and a $263 million secured bank loan, including a modification of the company's fixed-charge covenant," S&P said in a note.

Earlier this week, WCI said its secured creditors extended a temporary waiver of performance until Jan. 16, and that management is continuing to work with lenders to discuss amendments to provide operating flexibility.

"If WCI is not successful and secured creditors foreclose on collateral, unsecured indebtedness could be accelerated," S&P said.

WCI shares were sliding 29% to $2.28 in afternoon trading. Other builders also tumbled on the concerns.

Hovnanian

(HOV) - Get Report

fell 10% to $4.59 and

Lennar

(LEN) - Get Report

dropped 8.3% to $13.40.