Technical Olympic USA
plunged 33% Tuesday after the homebuilder disclosed that Deutsche Bank is demanding the payment of certain debts related to a troubled joint venture in Florida.
Technical Olympic disputes the move and said it doesn't believe its obligations under its credit agreements have been triggered. Still, shares of the company recently were down $3.55 to $7.24 on heavy volume.
The builder said in a
Securities and Exchange Commission
filing that it received a letter last week from Deutsche Bank alleging that the company's Transeastern venture has failed to comply with certain of its obligations under the credit agreement. As a result, the lender said that multiple defaults have occurred, requiring a payment of debts under the guarantees.
According to the SEC filing, the joint venture has borrowed some $675 million from the lenders, secured by the venture's assets.
Technical Olympic, in a letter to Deutsche Bank, said the problems with the venture haven't been caused by the company.
"We fully intend to honor whatever obligations we may have under the loan guaranties,'' said Antonio B. Mon, president and chief executive of Technical Olympic, in a statement. "However, our analysis of the facts is not complete and we believe that we have yet to uncover all relevant issues that might factor into any ultimate resolution. As such, any demands being placed on TOUSA at this stage of the review are clearly premature."
The Transeastern venture has been hit by a steep housing slowdown in Florida. Technical Olympic said in late September that its total exposure to the joint venture is $141 million. At the time, the company said it believes that the worst-case scenario will result in a $92.6 million loss of its investment in the venture and create doubt about the eventual recoverability of $48.5 million of loans and receivables.
"It is our belief that the circumstances being experienced by the Transeastern Joint Venture today are clearly a reflection of the Joint Venture's inability to sell and deliver the volume of homes necessary to support the capital structure due to the downturn in the Florida housing market," Mon said Tuesday. "Furthermore, we continue to believe in the quality of the Joint Venture's assets and look forward to reaching a solution for all parties.''
The company plans to delay filing its third-quarter report with the SEC and said the results for the period will be a "significant" change from the prior year because of asset impairment charges.