Fitch IBCA cuts Oakwood Homes ratings
NEW YORK, Nov 8 - The ratings on Oakwood Homes Corp's $175 million 8.125% senior notes due 2009, and $125 million of senior notes at 7.875% due 2004 are lowered to BB-' from BB by Fitch IBCA.
This downgrade is based on the recent structural subordination of these Notes to the newly signed bank agreement and the proposed REMIC agreement.
These actions follow the prior downgrade on Oct. 22, 1999 from BBB- to BB'.
Fitch IBCA also assigns a BB' senior unsecured debt rating and BB+' secured bank debt rating.
The ratings remain on RatingAlert Negative where they were initially placed on Aug.13, 1999.
On Nov.5, 1999, Oakwood announced it entered into an agreement with its bank group to extend the maturity of its revolving credit facility for 12 months.
The bank facility decreased to $125 million from $175 million and is now secured primarily by the company's inventory at its retail subsidiary, which has approximate book value of $375 million.
- Prior to this date the bank borrowings were unsecured.
- There is currently around $84 million outstanding on this facility.
- The extension under the agreement is dependent on delivery of customary closing documents and also provides for a one-month period to renegotiate loan covenants.
In addition, Fitch IBCA expects the company to close a new credit agreement within few weeks, that will provide additional liquidity to finance its subordinated REMIC interest held from prior and future asset-backed securities transactions.
Fitch IBCA believes that Oakwood has taken appropriate steps to essentially restructure its whole operating business, in light of stiffened competition.
The ratings remain on RatingAlert Negative, however, since successful execution of this plan will be challenging.
The company's operating performance will continue to remain under pressure as it deals with its two most pressing issues, inventory overhang and its dependence on the securitization market for funding, which has led to elevated financing costs for Oakwood Acceptance Corp.
As weakened industry fundamentals are likely to persist for the next several quarters, Fitch IBCA will closely monitor actual performance to projected results.
Founded in 1946, Oakwood is headquartered in Greensboro, NC. Oakwood is the industry's third-largest manufacturer and the nation's largest retailer of factory-built homes, which are sold through its 383 company owned and operated retail sales centers located primarily in the Southeast and Southwest.
Oakwood's financial services business completes the network by providing customer financing, as well as insurance coverage, for the bulk of manufactured homes Oakwood sells.
(Press release provided by Fitch IBCA) |
