Beazer's loss hurts lender ties; shares fall

By Helen Chernikoff

NEW YORK (Reuters) - Beazer Homes USA (BZH.N) posted a wider quarterly loss on Tuesday, further damaging ties with its lenders, restricting its financial flexibility and sending its shares lower.

The loss caused the home builder's tangible net worth to fall below $350 million. This in turn caused lenders to slash the amount of money potentially available for borrowing to $250 million from $400 million, said analyst Vicki Bryan of corporate bond research firm Gimme Credit.

However, the company's borrowing base is so depleted that it does not have access to borrow under that facility and in fact has no borrowing capacity at all, she added.

"Beazer is heading into one of the worst recessions since the 1930s with virtually no bank support," Bryan said.

Beazer's net loss widened to $473.9 million, or $12.29 a share, in the fourth quarter ended September 30 from $155.2 million, or $4.03 a share, a year earlier.

The loss from continuing operations was $12.32 a share, compared with the average Wall Street forecast of a loss of $2.30, according to Reuters Estimates.

"Fiscal 2008 was a very challenging year for both our company and the homebuilding industry," Chief Executive Ian McCarthy said during a conference call with analysts. "We should realistically expect that both closings and average sales prices will be lower in fiscal 2009 and that we will again likely incur a loss for the year."

Quarterly revenue fell to $712.6 million from $1.09 billion.

Beazer did manage to increase its cash to $584.3 million on September 30 from $314.2 million three months earlier, which J.P. Morgan analyst Michael Rehaut deemed a "solid" rise.

However, Bryan said the quality of the cash was poor, given that the company obviously did not generate it from selling homes.

"If your cash is generated from asset sales, that's not recurring operating income and that's not going to keep them afloat," she said.

She also said Beazer only had access to about $444 million of its cash because the banks have restricted $140 million for use as collateral.

Although the company has no borrowing capacity, it must maintain even a nominal relationship with the banks in order to foster the perception of ongoing and future viability, Bryan said.

"If they had no bank relationship, it would send a dire signal to the market," Bryan said. "However, who are they fooling, because they can't borrow."

Beazer declined to comment.