Jeffrey Peterson, chief executive of Standard Pacific Corp., has been working nonstop to save the Irvine-based homebuilder since taking over in March.
Now he has a $530 million financing deal to show for it.
“The No. 1 issue that I’ve been addressing is our capital structure,” said Peterson, who replaced longtime chief executive Stephen Scarborough more than two months ago. “This goes a long way to solving” that issue.
Last week, Standard Pacific struck a complex financing deal with New York-based private equity firm MatlinPatterson Global Advisers LLC that’s a life preserver for the company.
The deal,a combination of stock and debt retirement,is valued at nearly three times the market value of Standard Pacific before it was announced.
The struggling builder’s stock jumped about 50% last week on the news,including its biggest one-day percentage jump in more than 20 years. Standard Pacific had a market value of about $250 million last week.
The company was valued at more than $3 billion at the peak of the housing market in 2005.
Part of the deal with MatlinPatterson calls for the firm to buy $381 million in new stock.
The other part calls for MatlinPatterson to retire $128.5 million worth of Standard Pacific debt in exchange for stock.
The company’s debt-to-capital ratio had been about 65% prior to the deal, among the highest of any major homebuilder.
It’s set to be closer to 35% after the deal. The deal should help shake off persistent rumors that Standard Pacific was exploring bankruptcy.
Less debt should help the company weather the devastated housing market and ready it for when things recover, Peterson said.
MatlinPatterson, which runs a fund of about $9 billion, describes itself as an investor in distressed companies. Standard Pacific certainly fits the bill.
At the start of 2008, Standard Pacific was an odds-on favorite to become the largest national homebuilder to declare bankruptcy during the current downturn, thanks to its heavy debt and focus on hard-hit California, Florida, Arizona and Nevada.
Those rumors intensified in January after Standard said it had hired New York-based restructuring specialist Miller Buckfire & Co., causing a sharp drop in its already-slumping stock.
Last month, Standard Pacific officials said the company was considering a possible sale, among other alternatives.
A sale no longer is likely, Peterson said. Nor is the company likely to go private, he said.
“We feel this is a great (solution), both near term and long term,” Peterson said.
MatlinPatterson’s investments,which have included money makers such as WorldCom Inc. and chemical maker Huntsman Corp. as well as busts such as ATA Airlines Inc.,often result in the private equity firm taking control of the company.
That’s unlikely to be the case with Standard Pacific. MatlinPatterson’s voting stake is set to be capped at 49%, even if it ends up owning a higher percentage of Standard Pacific’s stock.
MatlinPatterson is set to get three seats on Standard Pacific’s board, which is being upped to 11 members. It won’t be able to control a majority of the board.
“It’s not their intention to change the management team or the day-to-day operations,” Peterson said. “They’re not coming in to run the company.”
MatlinPatterson started looking at homebuilders last fall and approached Standard Pacific in March, after the executive shake-up, according to Peterson.
“They saw us as a very strong franchise,” he said. “They valued our management team and our (homebuilding) footprint.”
The investment doesn’t mean that the private equity firm,or the builder,thinks the housing market is ready to rebound yet, Peterson said.
“We don’t feel that we’ve hit bottom,” he said. “There’s still a lot of overhead. Our understanding (of MatlinPatterson’s investment) is that they want to invest today to position (themselves) to really capitalize” when the market turns around.
Standard Pacific, which lost $216.4 million in the first quarter on revenue of $348 million, still needs to address other financial issues.
Among them: getting a permanent amendment to its credit agreements, of which the company is in violation. In May, Standard Pacific got a three-month waiver, which expires in mid-August.
“Operating under waivers, or waiver extensions, is no way to (run) a company,” Peterson said.
Formerly Standard Pacific’s lead independent director, Peterson said the past two months have been a time-consuming but enjoyable challenge.
“There’s been no time for golf, but my dog still wags his tail when I come home, so I think he remembers me,” he said.
