Like a thumb caught between a nail and a hammer, Beazer Homes
It's not news any longer that Beazer, Hovnanian
Yet Beazer's woes extend beyond just that. Earlier this year the homebuilder fired its chief accounting officer for what it says was an attempt to shred documents related to a federal mortgage-lending probe. That internal probe led it to delay filing its third-quarter financial statements with the SEC, which technically put it in default to its bondholders.
Bondholders typically haven't swooped in on the carcass of a troubled company that's delayed filing its financial statements. Yet as hedge funds have become more entwined in the machinations of companies, they've begun to take a hard-line approach -- particularly at a time when their own returns are sagging. Loaning money to companies is just another investment strategy and no longer a benign transaction.
For its part, Beazer says it's not in default. It claims it has only to deliver the financial statements to its bondholders after they're filed with the SEC. The bondholders naturally claim that when the homebuilder delayed the filing, it defaulted on its covenants. Now it's in the hands of the courts.
It seems likely that Beazer will have to pay the bondholders to get them off its back, at least temporarily. KB Home
Considering the war of words being waged right now, if Beazer doesn't file its financials within the 60-day cure period, expect it to have to fork over some dough, too. There's the added risk that all this could throw the company into bankruptcy. If hedge funds have shorted the stock, they could end up winning that way, too. In its complaint against the bondholders' trustee, U.S. Bank National Association, Beazer charges "Noteholders, including various hedge funds and other opportunistic investors, have purchased Beazer's bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding repayment in full."
There's precedent for Beazer to be found in default. Last year, technology services provider BearingPoint
With so much judicial uncertainty and the vultures circling, it's little wonder that investors are feeling all thumbs with this stock -- and that they're all black-and-blue too.