I received a letter in the mail from a reader of this blog today. There was no return address and it just contained this article TOUSA Settles Transeastern Deal and a press release entitled TOUSA Completes New Financing and Global Settlement in Traneastern Joint Venture.
The community of Independence here in Winter Garden, FL is a former Transeastern Homes project that is now under the TOUSA brand of Engle Homes. After reading these articles, I would definitely think twice about signing a contract to build with a large deposit in this community or any TOUSA developments for a little while. Current residents here may want to stay up to date on TOUSA’s financial stability.
The article states TOUSA Inc., along with the Falcone Group, agreed to buy the assets of Coral Springs, FL based Transeastern Homes in 2005 and finally after 2 years of litigation TOUSA gets a deal that gives them sole control. The Falcone Group was the former majority owner of Transeastern Homes and will retain a 50% interest in the company. The deal will require TOUSA to obtain $500 million in debt. It sure doesn’t seem like a good time for a home builder to take on so much debt.
The Transeastern Homes along with an additional 7,500 homesites, will now be rolled into Engle Homes, one of TOUSA’s home building companies in Florida. The deal calls for TOUSA to pay $422.7 million to its primary lender, TOUSA will issue other lenders $20 million in notes that will be due in 2015, as well as preferred stock carrying an aggregate liquidation total of $117.5 million. TOUSA will issue additional lenders warrants to purchase TOUSA stock, carrying a value of $16.25 million.
TOUSA also stated that it anticipates the deal will increase its total losses brought on by the Transeastern Homes by roughly $38 million from the $354.3 million the company estimated in its fourth quarter report. Sure sounds like the Falcone Group is making out much better on the deal. What is startling is that Deutsche Bank sent letters to TOUSA demanding payment of debt potential and actual defaults in later 2006 according to TOUSA’s 2006 financial statement.