NEWPORT BEACH — Presley Cos. said Monday that it has arranged a two-month extension of its $360-million credit line while it continues efforts to renegotiate its debts in the face of declining land values.
Presley also said that it has signed short-term extension agreements on $45.7 million in loans on two joint venture projects in Riverside and San Diego counties and that it has bought out its San Diego County joint venture partner, a unit of Home Federal Savings, for $9.9 million.
The dual announcement was made after the stock market closed Monday. Investors may have anticipated good news, however, because the stock jumped 38 cents a share in moderate trading on the New York Stock Exchange to close at $4.63.
A company official declined to comment, but the two-month extension says Presley's lenders have agreed to ignore the Jan. 31 credit line expiration and to allow the company to operate until March 31 with a minimum net worth of $125 million--almost 11% less than the $140-million minimum under the expired pact.
Presley's last reported net worth, on Sept. 30, was $144.6 million.
Under the so-called forbearance agreement, Presley's major lenders also are allowing the residential building company to increase its debt load to three times its net worth from the previous limit of 2.75 times net worth.
Company officials said Presley's total borrowings of $317.2 million as of Dec. 31 exceeded that date's loan limit of $313.9 million but would not reveal the company's Feb. 1 net worth or what it was at the end of 1992. The company's 1992 annual financial statement has not yet been filed with the Securities and Exchange Commission.
David Siegel, Presley's chief financial officer, said the company's banks have agreed not to require Presley to repay the Dec. 31 borrowing excess of $3.3 million while the two-month grace period is in effect.
He also confirmed that under the extension Presley would be able to borrow up to $375 million--or three times the new minimum net worth of $125 million.
The loan limit changes periodically as Presley's real estate holdings are appraised.
Appraised values of its Southern California holdings have fallen substantially in the past year, and Presley officials said Monday they expect even lower appraised values in the future, which will further reduce the maximum credit available.
Siegel would not disclose original purchase prices or present appraised values of the company's land holdings, but land brokers and other builders have been consistent in recent weeks in reporting 30% to 50% declines in the price of Southland residential land since 1989.
Presley acquired several large tracts of undeveloped property in 1989, when Southern California land prices were at or near an all-time high.
One major area builder said that property in north Orange County that sold for about $120,000 per lot in 1989 recently was sold again for just $65,000 a lot.
On Aug. 10, Presley jarred investors by reporting that it had taken a $26-million write-off in the second quarter to account for the falling value of land it had acquired in several Southern California communities in 1989.
The day after that announcement, panicky stockholders sold 739,200 shares of Presley stock, driving the price down by 30% to $5 a share.
The price per share subsequently fell to $2 in early October before rebounding slightly.
Presley, which is traded on the New York Stock Exchange, went public in October, 1991, at $10 a share.
Monday's stock price increase could reflect a general belief that the Southern California housing market is once again showing signs of life, said Mark Matheson, an analyst at Crowell Weedon & Co. in Los Angeles.