The management of the TECHNICAL OLYMPIC Group announces that its listed on New York Stock Exchange (NYSE) USA subsidiary, TECHNICAL OLYMPIC USA INC. (TOUSA), announced, literatim, the following:
Technical Olympic USA, Inc. (NYSE: ΤΟΑ) announced today that in response to demand for payment under certain limited guaranties provided by TOUSA in connection with the financing of the Transeastern Joint Venture, it has informed Deutsche Bank Trust Company America (Deutsche Bank), the administrative agent for the lenders, that it does not believe that its obligations pursuant to the Guarantees have been triggered. TOUSA has formally disputed the assertion and is in discussions with the Administrative Agent and the lenders concerning this situation.
In a letter dated November 6, 2006 to Deutsche Bank, TOUSA asserted that the problems being experienced by the Transeastern Joint Venture have not been caused by the actions of TOUSA. The letter stated that the Transeastern Joint Venture?s problems are a direct result of the highly-leveraged capital structure of the transaction together with adverse market conditions, which will prevent the Joint Venture from achieving the anticipated 3,500 to 4,000 annual deliveries. The letter further stated that Deutsche Bank?s assertion that TOUSA has an obligation to ?undertake funding initiatives to stabilize the borrower? is not a requirement of either guaranty.
Since September 21, 2006, TOUSA and the Joint Venture?s lenders have been working together with financial consultants to produce a global solution for all parties involved, including TOUSA and the Joint Venture?s lenders and land bankers. This process is ongoing, but is still not sufficiently complete to produce the facts necessary to permit meaningful analysis of a potential solution to the situation or to determine TOUSA?s exposure, if any, under the Guaranties.
"We fully intend to honor whatever obligations we may have under the loan guaranties," stated Antonio B. Mon, President and Chief Executive Officer of TOUSA. "However, our analysis of the facts is not complete and we believe that we have yet to uncover all relevant issues that might factor into any ultimate resolution. As such, any demands being placed on TOUSA at this stage of the review are clearly premature. It is our belief that the circumstances being experienced by the Transeastern Joint Venture today are clearly a reflection of the Joint Venture?s inability to sell and deliver the volume of homes necessary to support the capital structure due to the downturn in the Florida housing market. Furthermore, we continue to believe in the quality of the Joint Venture?s assets and look forward to reaching a solution for all parties".
The Demand Letters allege that the Joint Venture has failed to comply with certain of its obligations pursuant to the Credit Agreements and as a result multiple potential defaults and events of default have occurred which allegedly have triggered the obligations pursuant to the Guarantees, and that TOUSA pay its obligations under the Guaranties. TOUSA has rejected such demands because the letters contain no factual allegations which would support such demand for payment. On November 6, 2006, the Company filed a Form 8-K with the SEC providing additional information on the loan guarantees and the demand for payment.
Filing of Quarterly Report
TOUSA also announced today that it expects to file a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission ("SEC"), in order to extend the filing due date for its Quarterly Report on Form 10-Q for the third quarter ended September 30, 2006. This filing extends the November 9, 2006 filing due date for up to five days under SEC rules. TOUSA requires additional time to file its Form 10-Q due to the change in its financial statements presentation to provide segment information and the anticipation that it will report a significant change in its results of operations for the three months ended September 30, 2006 from the corresponding period for the previous fiscal year due to asset impairment charges.