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Beazer Homes USA Inc. Message Board

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  • csco_brat csco_brat Dec 31, 2007 7:38 AM Flag

    SPF, BZH, HOV all goin BK in 08

    BZH zero chance of BK in 2008. In order to go bankrupt you have to miss some bond payments.

    BZH has $258 million in cash (the most in its history!).
    Zero drawn on credit lines.
    Cash flow positive. They generated cash last 2 quarters.
    yes they will lose money. But it will be 2 years before they go bankrupt at least.

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    • They have 1.9 billion in debt and their assets are seriously impaired, even if they haven't written them down yet. They have halved the size of the company and can't sell homes, much less close the sales they already had on their books (see 68% cancellation rates). The only reason their cash position went up is they moved to pay contractors 60 days after the work is done, thus inflating cash position. Legal bills are rising quickly defending not only SEC and FBI investigations, but soon massive shareholder suits from their violations of Mortgage lending laws. Throw in fines, overhead, taxes on inventories that are decreasing in value and the picture is not very pretty. BK is assured for 2008.

      Here is the BZH picture in a nutshell so you longs can understand. A man borrows $1mm and buys a house on 1000 acres for $8mm with no money down. His payment is int only at $30,000/month and his upkeep is $10,000 month. After closing costs he still has $950,000. A year later he finds out that the house is now only worth $800k and after costs and expenses he only has $470,000 left. He panics and fires 60% of his gardners, maids and cooks. He decides he will change their pay schedule to 60 days later than it used to be so he has an extra $20,000 cash on the balance sheet. This drops his upkeep to $4,000/month but his payment is still $30,000.

      Let's look in 6 months later. Now our guy has only $254,000 left and his home and property are starting to show the neglect from firing 60% of the upkeepers.

      One day the bank president where he got the loan drives by and sees what is going on. He goes back to the bank and checks our guy's bank balance and sees that he only has enough cash to pay another 8 months of int only payments and hasnt even made a dent in the principal owed. The bank president also knows that the guy paid way too much for the property and that the 1mm loan is undercollateralized by several $100,000 and that the guy is in tech default on his loan because the value of the property is down and he isnt compliant with other agreements in teh loan docs.

      What do you think the bank pres will do? Wait till there is no money left? Or move to begin foreclosure immediately to get what cash he can and then sell the house to try to cover as much of the losses as he can?

      Bondholders are not stupid. They know that the assets are depreciating here. They also know that that BZH is HEMORRHAGING cash. The company will be in tech default of their bond covenants once they file their 10Q's.

      So if you want to believe the hype, back up the truck and load it up here. You will be very sorry in 2008. This market has only just begun to crash and isnt even close to a bottom.

    • Never mind that the market is pricing credit default swaps for BZH well into the "bankruptcy is imminent," range.

      Consider: swaps on AT&T run about 2% per year (or $20,000) for each million of debt insured.

      Swaps on BZH run about 12% per year (or $120,000) for each million of debt insured.

      Over a 5 year interval, then, T pays out $100K to insure each million, while BZH would have to pay $600K to insure each million.

      Irrespective of what various posters (ignorant or not) may think, the MARKET is pricing in BK or near BK for BZH within the next MONTH, much less within the next YEAR.

      Add to this the fact that BZH hasn't reported - not ONE FUCKING WORD - about its financial condition; that BZH hasn't come clean with all the restatements necessary; that BZH is being sued left right and center, and investigated (AGAIN) by the SEC.....

      You're right, of course. NO way this company would be a riskly long position - no way.

      Today's price action in the homebuilders...hmmmmm, short covering do ya think?

      Manipulation, do you think even more?

      Nearly 2 million shares traded - and up a measly $0.30. Oh yes, that's strength, boys and girls.

    • They have 1.9 billion in debt and their assets are seriously impaired, even if they haven't written them down yet. They have halved the size of the company and can't sell homes, much less close the sales they already had on their books (see 68% cancellation rates). The only reason their cash position went up is they moved to pay contractors 60 days after the work is done, thus inflating cash position. Legal bills are rising quickly defending not only SEC and FBI investigations, but soon massive shareholder suits from their violations of Mortgage lending laws. Throw in fines, overhead, taxes on inventories that are decreasing in value and the picture is not very pretty. BK is assured for 2008.

      Here is the BZH picture in a nutshell so you longs can understand. A man borrows $1mm and buys a house on 1000 acres for $8mm with no money down. His payment is int only at $30,000/month and his upkeep is $10,000 month. After closing costs he still has $950,000. A year later he finds out that the house is now only worth $800k and after costs and expenses he only has $470,000 left. He panics and fires 60% of his gardners, maids and cooks. He decides he will change their pay schedule to 60 days later than it used to be so he has an extra $20,000 cash on the balance sheet. This drops his upkeep to $2,000/month but his payment is still $30,000.

      Let's look in 6 months later. Now our guy has roughly $270,000 left and his home and property are starting to show the neglect from firing 80% of the upkeepers.

      One day the bank president where he got the loan drives by and sees what is going on. He goes back to the bank and checks our guy's bank balance and sees that he only has enough cash to pay another 9 months of int only payments and hasnt even made a dent in the principal owed. The bank president also knows that the guy paid way too much for the property and that the 1mm loan is undercollateralized by several $100,000 and that the guy is in tech default on his loan because the value of the property is down and he isnt compliant with other agreements in the loan docs.

      What do you think the bank pres will do? Wait till there is no money left? Or move to begin foreclosure immediately to get what cash he can and then sell the house to try to cover as much of the losses as he can?

      Bondholders are not stupid. They know that the assets are depreciating here. They also know that that BZH is HEMORRHAGING cash. The company will be in tech default of their bond covenants once they file their 10Q's.

      So if you want to believe the hype, back up the truck and load it up here. You will be very sorry in 2008. This market has only just begun to crash and isnt even close to a bottom.

    • Riiiiight. As impairment charges and general market RE malaise continues for the next two years (biggest reset for the Option ARMS is in 2011), you think the banks are going to sit and watch BZH spend their credit line to max.

      Banks are already starting to hoard, literally, physical cash because credit is so tight. BZH had it's one pass. Banks and creditors will be tightening the noose soon enough to get whatever they can out of this carcass.

    • WRONG!!!!

      1) That cash amount is now 2 quarters old, and not reflective of cash burn since 9/30/2007. So...its probaly 2/3 to 1/2 that amount.

      2) A company can declare BK at any time they feel that liabiliteis outsrtip assets.

      3) BZH cannot demostrate to its creditors that it can turn around, so will probably be forced into the courts to liquidate.

      You do not have to be literally out of cash to be BK. You can have TONS of cash and assets...but if they are not enough to weather your market place...then you are insolvent!!

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