NEW YORK, CHICAGO -- Shares of Beazer Homes USA Inc., the home builder facing investigations by the FBI and securities regulators, plunged the most ever on speculation the company may file for bankruptcy. Beazer said the rumour was untrue.
"We do not know where these scurrilous and unfounded rumours started," the company said in a statement.
Beazer led shares of U.S. home builders lower, with the worst housing slump in 16 years leaving eight U.S. home builders nursing losses of $1.97-billion (U.S.) and expenses of more than $3.1-billion as property values fall and land purchases are abandoned. Beazer last week reported a net loss of $123-million.
"We're confident that what's going on today is much ado about nothing," said Joseph Snider, a senior credit officer at Moody's Investors Service in New York. "If anything, they're more liquid than they were before and they're coming into their fourth fiscal quarter of the year, where they generate the most cash. So we think it's just a bear raid on the company."
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No bankruptcy filing for Beazer was found in a check of court dockets in Atlanta where the company is based, or in New York or Wilmington, Del.
"We're hearing Beazer is supposedly going bankrupt," said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages $5-billion in San Antonio. "If in fact that comes to fruition, the market's going to be in a world of hurt."
The Federal Bureau of Investigation said in March it was investigating Beazer for potential fraud after The Charlotte Observer newspaper reported the company sold homes to low-income buyers who couldn't afford them, financing the houses with mortgages based on expectations the borrower's income would rise.
The company said last week the Securities and Exchange Commission had launched a formal investigation.
The perceived risk of owning Beazer's bonds rose yesterday as credit-default swap investors boosted the amount they demanded to take on the risk that Beazer will default on its debt.
Sellers of Beazer credit-default swaps are demanding $2-million upfront and $500,000 a year to protect $1-million in bonds, according to CMA Datavision in London. Credit-default swaps are used to speculate on a company's ability to repay its debt or hedge against the risk they won't.
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