When you say “kaput” or “BK” are you meaning Chapter 11 reorg or liquidation (Chapter 7)? If it is Chapter 11, it is no biggie; they can ride through the down turn. I think all builders will go through some sort of bankruptcy during the big bang – the question is can they reorganize or liquidate.
No idea. I’m not an accountant, just a layman trying to see if I can figure out what’s going to happen to Beazer. According to their March 10-Q, Beazer had $2.9 billion in inventory (land and homes), $462 million in what appear to be options on real estate, $200 million in cash, $66 million in receivables, and $526 million in miscellaneous assets. In that same quarter Beazer had $2.6 billion in total liabilities.
On the call, Beazer stated that their “tangible net worth” was $1.3 billion as of June 30. However, their current market cap is only $441 million. Thus, the market is saying that Beazer is worth ~$859 million less than what Beazer said on the call. My guess is that the market is saying that the $462 million in option contracts is worthless and that the inventory is now only worth around $2.5 billion. Is that enough of a write-down? That would be about %16.
My guess is that a 16% write-down is not enough. Although Beazer is still making sales ($800 million worth in the March quarter), I would bet that the inventory that they have left is stuff that is hard to turn and will get harder to turn. If the inventory turns about to be worth 70% of what it is listed at on the balance sheet, then Beazer’s debt is basically greater than it’s assets and they would be chapter 7 (right?)
I’ve made a lot of assumptions in this post, and I’m not an expert, so I would appreciate feedback from you experts out there to point out places where I’ve steered down the wrong path in this post. And thanks for the responses so far.
