Lyon listed its tangible net worth as a negative $9.7 million at the end of June, the end of its most recent earnings report. Having a net worth that falls below $75 million for several months has begun to trigger loan covenant violations with a $206 million loan the builder took from Colony Capital and Colony Financial two years ago. So far, Colony has waived the requirement several times. On Thursday, Oct. 27, the waiver runs out again. Colony has the right to accelerate payment on that loan if Lyon defaults by not meeting the tangible net worth requirements.
It doesn’t look like the company is poised to turn a profit anytime soon. It lost $22.4 million in the first six months of the year as its home sales also fell.
The California-based Lyon is carrying more than $489 million in debt divided between the Colony term loan and three sets of senior notes. The interest payments alone on those debts total $54.4 million a year. The Colony term loan’s annual interest bill is $28.8 million of that total.
William Lyon Homes: More Than $489,000,000 in Debt, In Talks With Creditors
Nearing default with multiple creditors, William Lyon Homes is seeking to implement “a comprehensive recapitalization of the company,” according to CEO Gen. William Lyon. Builder Magazines’s Teresa Burney reports that the home builder is not alone, as other large housing contractors are also struggling to make payments on loans as a result of poor sales.