) --

Orleans Homebuilders


, which earlier this week

confirmed that it had received a de-listing notice from the

New York Stock Exchange

, announced an amended agreement with its lenders on Wednesday morning.

Orleans says that the amended $375 million loan agreement, which is expected to take effect on January 29, 2010, would ensure its short-term viability, providing adequate liquidity for operations over the next 12 to 18 months.

However, the juiciest items among the torturous legalese of the Orleans Homebuilders financial release were loan-term conditions linked to a potential sale of the homebuilder itself, a liquidation of all of its undeveloped land, and the fact that many of Orleans' 16 lenders have not yet approved the amended agreement.

If the lenders do not each vote to approve the amended agreement on or before December 20, the credit facility will mature on that date and Orleans will not have sufficient funds to repay amounts outstanding or continue normal operations. What's more, the long-term outlook for Orleans is bleak even with the new credit facility:

Orleans warned that it anticipates that even if it successfully enters into the amendment, without either a refinancing, recapitalization or outright sale within approximately 12 months from closing date, the homebuilder will be unlikely to have sufficient liquidity to continue its normal operations.

As for a sale of the homebuilder, the agreement says that there could be "a potential significant principal reduction or debt forgiveness by the lenders" if Orleans can either retire or refinance the entire restructured credit facility, or if Orleans can sell itself within the next 6 to 12 months.

Jeffrey Orleans, CEO of the homebuilder, spoke in the release as if it were a done deal: "We appreciate the support of the bank group and we look forward to approval of the temporary amendment and to finalizing the longer-term bank maturity extension."

The Orleans CEO also tried to strike a positive note about the outlook for the homebuilder, which currently is on de-listing watch, and seemed to wink at a potential sale.

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"We are seeing some stabilization in the economy through improvement in year-over-year net orders, and we believe that we have the opportunity to successfully recapitalize and reposition our Company, or to complete other strategic alternatives that we are actively pursuing," Orleans said.

Orleans said it had engaged

BMO Capital Markets


Lieutenant Island Partners

as advisors in connection with a potential sale or recapitalization of the company.

The unloading of land may include all of Orleans' undeveloped land positions over the next 12 months, while also significantly limiting any new land acquisitions. But the land sales are not going to benefit shareholders, as the Orleans land fire sale is expected to result in material financial losses, both relative to book value reflected on the March 31, 2009 quarterly report and to bank borrowing base value.

The amended agreement includes a 24-month maturity extension, the granting of additional collateral, and material step-down requirements in the size of the loan over the next 6 to 18 months. There could be a significant principal reduction of up to $70 million if Orleans can either retire or refinance the credit facility, or if it can find a buyer within 6 months following the ultimate closing date of the amendment.

The potential reduction would be reduced to $45 million for the period that is after 6 months but before 12 months from the closing date, and would be $15 million thereafter.

The amendment also applies to Orleans' $30 million of 8.52% trust preferred securities and the fact that lenders can recapture or reduce these reductions to the detriment of equity shareholders. Orleans also noted that even in the event of a sale, the transaction might offer little or no value to its unsecured debt holders and equity shareholders.

Orleans CFO Garry Herdler said, "The combination of the agreement in principal on the credit facility, including the banks' willingness to potentially accept a significant principal reduction under certain limited circumstances ... should assist the company in achieving a recapitalization, refinancing or sale ... in the next 6 to 12 months."

-- Reported by Eric Rosenbaum in New York.

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