UPDATE 1-WCI Communities faces bankruptcy risk - Raymond James

(Adds analyst's comments, background and share movement)

May 8 (Reuters) - Home builder WCI Communities Inc WCI.N faces the risk of bankruptcy due to its deteriorating liquidity position, potential revaluations of deferred tax assets and likely losses through 2009, Raymond James said and downgraded the stock to "underperform" from "market perform."

Shares of the Bonita Springs, Florida-based home builder fell more than 19 percent to $2.10 in midday trade on the New York Stock Exchange. WCI stock has lost more than 88 percent of its value since May last year.

There is little value left for equity holders given WCI's outstanding debt of $1.7 billion, analyst Paul Puryear said.

WCI's liquidity position continues to deteriorate and stood at only $110 million in March, he noted.

"Moreover... lenders are completing appraisals of assets secured under the borrowing base, and management (WCI) acknowledged many of those new property values are likely to come back below current book value," Puryear said.

The difference in values would reduce borrowing base availability further and could trigger mandatory prepayments, he added in a note to clients.

On Wednesday, WCI posted a wider-than-expected loss for the first quarter and said aggregate number of net new orders fell 22.8 percent as contract cancellations and defaults at closing continued at higher than long-term historical rates.

The ratio of net debt to net capitalization increased to 83.3 percent from 65.5 percent a year ago, WCI said. (Reporting by Tenzin Pema in Bangalore; Editing by Himani Sarkar)