Equity Conversion Plan

Struggling home builder Standard Pacific got a big-time private equity bailout today by investors who will gobble up a bunch of equity in exchange for a nice cash infusion.  They’ve also been able to restructure about $13 billion worth of debt through MaitlinPatterson.

We’ve seen this with the banks taking on huge amounts of cash from sovereign wealth funds and via other channels, it will be interesting to see how many home builders are ’saved’ in the same manner.

From the Wall Street Journal on the Standard Pacific bailout:

Standard Pacific Corp., a struggling home builder which for months has been besieged by bankruptcy rumors, is getting a much-needed equity infusion from one of its creditors, the big private equity firm MatlinPatterson.

MatlinPatterson has agreed to buy about $381 million of stock at $3.05 a share. In addition, the firm will swap $128.5 million of the builder’s debt that it owns for warrants to acquire preferred stock. The builder is also planning a rights offering, which is expected to raise an additional $152 million. If shareholders reject the proposed offering, MatlinPatterson has agreed to back stop any short fall.

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Bloomberg reports that Countrywide’s President Dave Sambol won’t stay after the merger goes through.  Some head has to roll for the disastrous lending practices that have built up at Countrywide over the years.  I guess that’s what you get for “protecting the house.”

Bloomberg on Sambol’s exit at Countrywide:

Countrywide Financial Corp. President David Sambol, who became a target for critics of the mortgage company’s loan practices and executive pay, will leave after Bank of America Corp.’s takeover instead of running the combined home lending operations as originally planned.

Barbara Desoer, Bank of America’s chief technology and operations officer, will lead consumer real estate operations and Sambol is retiring, according to a statement today from the Charlotte, North Carolina-based bank. Desoer, 55, will report to Chief Executive Officer Kenneth Lewis.

Sambol and Countrywide Chief Executive Officer Angelo Mozilo have been under fire since Bank of America agreed in January to buy Countrywide for about $4 billion. Lax lending by their company, the biggest U.S. home lender, has been blamed for contributing to record U.S. foreclosures, and critics including U.S. Senator Charles Schumer had asked Bank of America to reconsider the decision to put Sambol in charge.

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