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WCI looks to reorganize during bankruptcy
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WCI Communities, the Bonita Springs-based homebuilder headed by billionaire investor Carl Icahn, filed for Chapter 11 bankruptcy protection Monday after failing to obtain new financing.
A statement the company issued said it and 126 subsidiaries filed for Chapter 11, under which WCI will restructure its debt and capital.
The company owes more than $1.9 billion to nearly 61,000 creditors, according to documents filed by WCI with the U.S. Bankruptcy Court in Wilmington, Del., where WCI Communities is domiciled.
The first hearing will be held there this morning.
“There is no talk of dismantling the subsidiaries. The plan is to stay intact,” said Tom Mulligan, a WCI spokesman.
Interim WCI President David Fry also issued a statement Monday, saying:
“Day-to-day operations will continue as usual, while we work with our stakeholders to restructure the balance sheet. We will continue to sell, build and deliver homes without interruption,” he said in the statement. “Construction and sales activities will continue; employees will come to work and be paid.”
A statement issued by the homebuilder also announced that Chief Executive Officer Jerry Starkey is leaving the company, effective immediately, following a “mutually determined” decision.
In the wake of the announcements, WCI stock plummeted nearly 48 percent on Monday to $0.66 a share.
The New York Stock Exchange suspended trading of WCI shares a minute after the opening bell rang to mitigate Wall Street losses.
Monday’s filing comes as little surprise, given the financially embattled company’s negative second quarter report and failed deals to stay afloat.
The first deal was to swap the $125 million in 4 percent unsecured senior subordinated notes due Tuesday with 16 percent senior secured notes due in 2013.
WCI had a little over $61 million in cash on the last day of June 30 — not enough to fulfill its financial obligations.
In late July, the company also offered 17.5 percent senior secured notes due in 2012 and a warrant to purchase 33.7392 shares of its common stock for every $1,000 of the principal amount.
The 90 percent approval from note holders didn’t happen, and the offer expired at midnight Monday, Aug. 4.
This followed the release of figures for the first half of 2008, when the company’s losses nearly quadrupled to $184.3 million, from $49 million in the first half of 2007.
In March 2007, Icahn — the WCI board chairman who holds a 14.5 percent share of the company — offered a buyout at $22 a share.
The deal fell through, leaving the company and shareholders in a lurch.
“The company, with all diligence, has attempted to avoid a bankruptcy filing,” Icahn said in WCI’s statement Monday.
When Icahn bought his WCI shares in early 2007, the stock was valued at about $19.
As of Monday morning, with share values under a dollar, the stock had lost approximately 96.5 percent of its value from then.
Excluded from the Chapter 11 filing is the company’s Watermark real estate brokerage, which does business as Prudential Florida WCI Realty, as well as its WCI Mortgage business and certain other joint ventures in which WCI is a partner, the company said in its press release.
WCI, which has holdings in Florida, New York, New Jersey, Connecticut, Maryland, and Virginia, started operating in 1946. It gained prominence in Southwest Florida with the Tiburon, Hammock Bay and Sun City Center developments.
WCI spokesman Ernest Scheidemann and Fry, who was WCI’s chief operating officer, were unavailable for comment Monday.
Fry’s salary as COO was $550,000. However, his total compensation package — which included stock options — was $891,261 in 2007.
Media inquiries were instead routed to California-based public relations firm Sitrick and Co., which was recently brought on board to handle press issues.
Mulligan, the spokesman for WCI through Sitrick, said letters and “other kinds of communication” went out to all stakeholders, suppliers, subcontractors, and customers, that the company is going forward with projects.
WCI sold off its Tuscany Reserve community for $65 million earlier this year to a group of European and Middle Eastern investors.
Rainer Filhaut with Naples’ International Realty Corp. advised the buyers.
He said Monday: “We’ve been looking at a few (WCI) products,” but there are no offers on the table.
“There are investors willing to pick off the assets ... There is no reason for (WCI) to continue as a whole; some assets will be worth more if sold separately,” said Vicki Bryan, an analyst with Gimme Credit, an investment research firm in New York City.
“It’s picking apart a carcass,” Bryan added. “And this beast has been dead for a while.”
Fry and other executives held a general staff meeting Monday but there have been no announcements of new staff cuts.
More than 500 WCI employees were laid off in the past 18 months.
Naples bankruptcy attorney Richard Hollander of the law firm Miller and Hollander, who is not working with WCI and is not a shareholder in the company, anticipates a WCI restructuring plan will take six to 10 months.
“I think WCI can come out stronger than when they started. They will strip the fat off,” he added.
Details of ousted president Starkey’s severance package will be available later in the week when WCI makes a filing with the SEC.
However, Starkey’s salary was $1.2 million in 2007. With stock options and additional compensation, Starkey collected a total $2.9 million.
The company declined to comment on Fry’s compensation under his new title of president.
WCI Communities has established a toll-free information line for vendors, customers and other interested parties: Information hotline at (800) 924-1890.
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WCI and about 130 of its subsidiaries have filed voluntary Chapter 11 petitions to restructure debt and capital. The company emphasizes that it will continue to build and sell homes.
-- WCI cut 575 jobs in November 2005, dropping the number of employees to about 2,100. The cuts were expected to generate annual savings of $46 million in salaries and benefits.
-- Bankruptcy records show debts at $1.9 billion. Assets total $2.18 billion.
-- Net loss for the first six months of 2008 totaled $184.3 million.
Other details from WCI:
-- Excluded from the filing: Watermark real estate brokerage, which does business as Prudential Florida WCI Realty, as well as its WCI Mortgage business. Prudential Florida WCI Realty will continue to provide real estate services and WCI Mortgage, an affiliate of Wells Fargo Home Mortgage, will continue to offer mortgages.
-- Recreational amenities and services at the company’s clubs and community associations will continue, and the company has requested bankruptcy court permission to continue to pay dues and deficit obligations.
-- WCI intends to pay lien claims as they come due and to sell homes free and clear to ensure that ongoing home sales continue uninterrupted. Additionally, the company has asked the court to confirm that all funds deposited by buyers in First Fidelity, the company’s title insurance company, can be distributed at closing.
-- Warranties will continue to be honored. WCI says it is in “final negotiations” with AIG to provide a supplemental warranty at no cost to WCI Communities’ homebuyers with contracts of sale currently in force, and for customers who enter into new contracts with the company.
Ongoing WCI communities: In Lee County: Pelican Preserve, Hampton Park at Gateway and the Colony in Bonita Springs on Estero Bay; in Collier: Artesia, Hammock Bay and Tiburon.
Information: 1-(800) 924-1890 or www.wcicommunities.com.
Comments
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Take bcbe with you..
#1 Posted by Trexler on August 4, 2008 at 11:37 a.m. (Suggest removal)
Does this mean Bush won't come and visit the WCI guys any longer? I've always enjoyed when US 41 getting closed for his seasonal visits.
#2 Posted by personalj on August 4, 2008 at 11:46 a.m. (Suggest removal)
The Wine Fest will take a hit this season with no tax write offs for WCI.
#3 Posted by suntan on August 4, 2008 at 11:53 a.m. (Suggest removal)
Bush came to visit Al Hoffman who use to run WCI. He cashed in and got our while the getting was good. Funny how that seems to always happen.
I feel bad for the employees but I am afraid that company dug it's own hole and now it's time to dig themselves out.
#4 Posted by swfl_ff on August 4, 2008 at 11:53 a.m. (Suggest removal)
Can we buy a WCI highrise unit for $100 now?
#5 Posted by esprit on August 4, 2008 at 12:06 p.m. (Suggest removal)
And now for the really bad news on housing...This interview from earlier today featuring the same analyst who correctly predicted the current turmoil in the credit markets:
http://www.cnbc.com/id/15840232?video...
#6 Posted by barron on August 4, 2008 at 12:06 p.m. (Suggest removal)
Greedy stock holders passed on a $20.00 plus offer from Carl Icahn over a year ago. I bet they would be happy today with $5.00 per share & a chance to reinvest those dollars. It's hard to feel sorry for those who will loose all their money, over greed.
#7 Posted by marco on August 4, 2008 at 12:13 p.m. (Suggest removal)
Will the last person in southwest florida please turn out the lights???
#8 Posted by BobbyBacala on August 4, 2008 at 12:21 p.m. (Suggest removal)
Back for more fun..Red Barron, great link..not previously described like that (notice how quiet the cnbc pundits were)...Credit Suisse said a month ago that there was "another $1.5 trillion to be expunged"..which matches the video' numbers...nothing much has been recapitalized and, in part, no money for loans.."if you dont need a loan, you can get it, if you need a loan, you cant"..bottom line lately...
#9 Posted by Trexler on August 4, 2008 at 12:28 p.m. (Suggest removal)
That "last person out" is a bit overused. I believe that was on a billboard in Seattle in the 70's that was put up when their industry was collapsing. I think they survived.
A lot of people saw this day coming for WCI when they turned down Icahn's original offer.
#10 Posted by jim09091 on August 4, 2008 at 12:32 p.m. (Suggest removal)
Up until the housing dump; I read blog after blog about how great Florida used to be before all the development. It now sounds like Florida will be great again. Hey speculators, don't forget your fu fu dogs on your way out. Any one notice fishing is getting better.
#11 Posted by yes on August 4, 2008 at 1:17 p.m. (Suggest removal)
Barron,
Why would anyone believe someone who's Oppenheimer's Director of Equity Research when NABOR and Hank Fishkind says we're at the bottom so buy now before the market goes up?! LOL
#12 Posted by almasonlybar on August 4, 2008 at 1:18 p.m. (Suggest removal)
The Party Is Over Naples!!!
Get your heads out of the sand!!!
#13 Posted by wsdnaples1 on August 4, 2008 at 1:53 p.m. (Suggest removal)
Way to go. File bankruptcy, but first get the money. Click on the link to find out what the CEO was given at the time the Chapter 11 was filed.
http://swz.salary.com/execcomp/layout...
#14 Posted by Parkmeister on August 4, 2008 at 2:10 p.m. (Suggest removal)
I don't understand why people are gleeful over the demise of WCI. In a community with no industrial base, the home building industry represents a major portion of our local economy.
Unless you live under a rock,(which some of you do)your home was constructed with the hard work of your neighbors in this community.
Every 2000sq.ft.home takes at least 3000 man hours to construct. That does not include the suppliers, support staff, supervision, inspectors, etc. In addition the county collects approx. $40,000 in impact and permitting fees. This in turn funds School, Firehouse, Libraries, and road improvements. Which start another round of good employment.
So when you see the For Sale sign go up on the home down the street, because he or she lost there construction job, go down and tell them how happy you are to see them go.
#15 Posted by Saah1 on August 4, 2008 at 2:11 p.m. (Suggest removal)
Saah1 - an erudite comment. Probably will be lambasted.
#16 Posted by naplesregular on August 4, 2008 at 3:35 p.m. (Suggest removal)
Saah1, where have you been? That has alredy happen, there is little to no construction for months! Get your head out of your .......
#17 Posted by wsdnaples1 on August 4, 2008 at 3:49 p.m. (Suggest removal)
Icahn, determined to make up for WCI losses will hold hardline, insist Bristol Myers Squibb pay much more than they've offered to buy Imclone.
It's showtime, folks.
#18 Posted by BonitaSprings1 on August 4, 2008 at 4:57 p.m. (Suggest removal)
Cool - now's the time to buy WCI stock. At that price, you can take a roll of the dice...ya never know.
#19 Posted by justobserving2 on August 4, 2008 at 4:59 p.m. (Suggest removal)
#6 Great clip and required viewing of any investor. Thanks, I missed it. Man, would I like to sleep near that beauty and economic genius. Never been so impressed. I'm in love...
#20 Posted by cornandbeans on August 4, 2008 at 5:05 p.m. (Suggest removal)
erudite
- very knowledgeable through study: having or showing great knowledge gained from study and reading.
naplesregular, apparently Saah1 doesn't live with the "commoners" or she would be delighted to see our "guest" workers leave. although a crime spree is happening on their way out, not that CCSO cares, but they are leaving.
#21 Posted by mimibuck on August 4, 2008 at 7:13 p.m. (Suggest removal)
Cover Towers in North Naples is an absolutely great WCI community!
Some sexy babes wandering around there all the time!
#22 Posted by bicoastal on August 4, 2008 at 7:25 p.m. (Suggest removal)
Bicoastal - pictures? Any good news today would be welcome.
#23 Posted by naplesregular on August 4, 2008 at 7:30 p.m. (Suggest removal)
rich democracts, and perverts. hangovers from the Clinton party.
#24 Posted by mimibuck on August 4, 2008 at 7:37 p.m. (Suggest removal)
wsdnaples and the other various forms of idiots blogging above: obviously you are all members of the "have nots", most likely due to your lack of work ethic, or maybe just because you are plain dumb.
But to spout your joy over the demise of a company that made many of the workers in both Lee and Collier county money, is to wish the same upon your own pathetic lives someday.
To hell with the likes of Starkey, as his life is now what he made it. His house and everything else he owns is up for sale. But parasites like him will always end up with something.
But to all the normal workers of WCI, that don't deserve to hear how really ignorant too many of you are, from those of us with ethics and compassion, we are sorry for what Starkey has put you all thru.
Now the rest of you can go back and start complaining again. And plesae do us all a favor and head out of town if you dislike it so much in Naples.
#25 Posted by sowestfla1975 on August 4, 2008 at 9:28 p.m. (Suggest removal)
sowestfla1975,
How incredibly insightful to pin this on Jerry Starkey, NOT. You must be one of those you describe so eloquently. You, quite obviously, have never had to stand on your two feet(maybe just an assumption on my part) and work hard for something. This is not something you pin Mr. Starkey's ears to the wall on exclusively. This was a drunken party that a whole bunch of folks participated in, maybe YOU included. Unless, of course, you had such incredible predictability.
#26 Posted by almasonlybar on August 4, 2008 at 9:46 p.m. (Suggest removal)
Sorry alamasonlybar but it is Starkey that ruled the nest up there and he was the majority force to say no to Icahn's offer. That is the only reason WCI is now gone. Unless you were one of his girls on the 3rd floor, I offer a view from inside that mess, without having to work for them. And what happened today was indeed predicted the day Starkey turned down his offer, at least from those of us that know the housing industry and saw the slowdown roaring at us.
The reason my world is not down to 44 cents a share is because I made my money by my own hard work,while on my feet and not my back.
So no sale here on feeling anything but contempt for Starkey or his buddies.
#27 Posted by sowestfla1975 on August 4, 2008 at 9:59 p.m. (Suggest removal)
Al Hoffman... good man.
Anyone who attempted to tell Jerry Starkey he was heading in the wrong direction was terminated... period. Terminated.
Many mid and upper tier managers left the company shortly after expressing their concerns about the direction the company was taking over years ago.
You can put this right where it belongs.. at the top. The only arrogant drunks are to be found at the "top".
#28 Posted by RunSilentRunDeep on August 5, 2008 at 5:46 a.m. (Suggest removal)
WCI was a sinking ship when I left voluntarily Feb 2007. I couldn't believe Starkey didn't take the offer of $22/share, I knew it was downhill from there. He has been the captain of this sinking ship for way too long, Ichan should have fought harder to get more control and avoid this situation. I recently saw one of my coworkers from WCI in June and he said they were being told to get their resumes ready. It's unfortunate to those who stuck it out, and unnecessary. Too bad there wasn't better leadership at the top.
#29 Posted by neapolitan12345 on August 5, 2008 at 8:23 a.m. (Suggest removal)
Does this mean that NDN will finally stop running 'special commentaries' from the dunderheads who drove Westinghouse/WCI into the ditch? Or will we still be treated to lectures on how to think act and live by these self-serving sociopaths and Bush fundraisers?
#30 Posted by greathornedlizard on August 5, 2008 at 9:18 a.m. (Suggest removal)
The story made it to Squack Box this morning as a sideline note to an Ican discussion. Commentators felt it was inevitable so they didn't give it much of a a discussion.
#31 Posted by Solitary1 on August 5, 2008 at 2:58 p.m. (Suggest removal)
Shouldn't this be in the police beat?
#32 Posted by greathornedlizard on August 5, 2008 at 8:55 p.m. (Suggest removal)
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