(Source: Business Wire)
Fitch Ratings expects to assign a 'CC/RR5' rating to Standard Pacific Corp.'s (NYSE: SPF) proposed private offering of $200 million of senior unsecured notes due 2016. The issue will be ranked on a pari passu basis with all other senior unsecured debt. The proceeds from the offering of the notes will initially be held in escrow. If the conditions to the release of the funds from escrow are satisfied, the company will use the net proceeds from the offering to finance the repurchase of certain outstanding notes of the company through tender offers, and to the extent there are any remaining proceeds from the offering after the completion of the tender offers, for the redemption or repurchase of other outstanding debt of the company.
The Rating Outlook is Negative.
The 'RR5' on the proposed unsecured notes offering and the company's unsecured debt indicate below-average recovery prospects for holders of these debt issues. Standard Pacific's exposure to claims made pursuant to performance bonds and joint venture debt and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. Fitch applied a liquidation value analysis for these RRs.
The ratings and Outlook for Standard Pacific reflect the current very difficult U.S. housing market and Fitch's expectations that the housing environment remains challenging for the remainder of the year. Nevertheless, there are more positive signals and developments for housing and related industries now than at any time previously in the downturn. Of course, challenges remain or are on the horizon that may not prevent a near-term bottom, but are likely to meaningfully moderate the early stages of a recovery.
The company had $568.8 million of cash on June 30, 2009. Standard Pacific generated $263.2 million of cash flow from operations during fiscal year 2008 ($65.2 million during the fourth quarter), which included $235.6 million of tax refunds received during the first quarter of 2008. Through the first half of 2009, the company generated $197.6 million of cash from operations, including a first quarter tax refund of $114.5 million. For all of fiscal 2009, Fitch expects the company to be slightly cash flow positive, excluding the first quarter tax refund. The company has some near term debt maturities, which will deplete some of its cash balance. Standard Pacific has the following near-term debt maturities: $148.5 million in August 2010, and $170.6 million in May 2011.
