Rough Housing

What Ryland Tells Us About Housing and Taxes

As a consultant on the public builders' operations/financial health, I can tell you with Ryland had looked ok with their debt ratio up to this point, but number indicator on how builders are doing is their ability to generate cash. Unfortunately, Ryland is falling behind and if their current performance continues, they will have less than $100 million in cash by the end of 2009 based on their debts that are coming to maturity over this period.

There are three general actions need to do in order to get cash: 1) borrow it (which will only make them highly leveraged) 2) sell assets (which this late in the game could sell as low as 60% of original value) or 3) generate it through their operations (refer to comments about margins - conversely, Lennar actually increased their margins in the past quarter to 18%). Ryland is doing none of these things well. Also keep in mind, that nearly 50% of their liquidity is from available credit lines according to documented sources

These are important considerations to keep in mind.