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ilivehere
Posts:165
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| 11/24/2008 5:40 PM |
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LandAmerica owns Southland TItle & Escrow, Commonwealth TItle & Escrow, Lawyer's TItle & Escrow. There have been a few title/escrow companies that have gone out of business, it looks like there may be a few more. Banks will probably not allow their loans(refi's/purchases) to be underwritten by LandAmerica and the three companies they own. I wonder if any of the big three real estate companies will merge or go out of business.
Article Below,
"LandAmerica shares plunge as deal's scotched"
Fidelity National Financial pulls out of acquisition after due diligence
By Alistair Barr, MarketWatch
Last update: 12:20 p.m. EST Nov. 24, 2008
SAN FRANCISCO (MarketWatch) -- LandAmerica Financial Group Inc. shares plummeted 88% Monday, plunging into penny-stock status after rival title insurer Fidelity National Financial Inc. pulled out of an agreement to acquire the company had agreed to buy LandAmerica on Nov. 7 in a deal valuing the company at almost $130 million.
The agreement was subject to completion of due diligence. Fidelity had until Nov. 21 to make a final decision and announced its decision to pull out late Friday.
The collapse of the deal leaves LandAmerica -- which wasn't in compliance with covenants on its bank debt as of the end of the third quarter -- in a tough spot.
"LandAmerica faces serious liquidity constraints now that the acquisition plans have fallen through," Fitch Ratings said.
Chicago Title, a subsidiary of Fidelity National, was going to set up a $30 million credit facility to make sure LandAmerica had access to enough short-term cash. That's not going to happen now.
Fitch Ratings downgraded the company's insurance subsidiaries to BB, or junk status, down from BBB+ previously.
Without a new acquisition agreement, some $250 million of borrowed money would be due immediately, Fitch noted. LandAmerica can't access the $50 million remaining under its bank line of credit, the rating agency added.
"We are disappointed with Fidelity's decision," said LandAmerica Chief Executive Theodore Chandler in a statement.
He added: "Our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times."
LandAmerica's shares slumped 88% to 53 cents during afternoon trading on Monday. Fidelity National stock gained 7% to $7.91.
Alistair Barr is a reporter for MarketWatch in San Francisco.
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ilivehere
Posts:165
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| 11/26/2008 12:06 PM |
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The above mentioned group, Southland Title, Commonwealth Title, Lawyer's Title, just filed bankruptcy. Crazy world right now, not sure how that is going to affect current escrow transactions with those companies. Can't be a good thing.
Happy Thanksgiving to all. |
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Brian
Posts:2626
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| 11/26/2008 1:01 PM |
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I wonder if policy holders will left out in the winter cold if they have claims.
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ilivehere
Posts:165
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| 11/26/2008 1:25 PM |
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No, I don't think so, the reserves to pay claims I believe are separate. I think the people out cold will people who are about to close escrow will now have to switch to another title company. Not a big deal really, process usually only takes a day or two.
Have a good holiday |
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Interested Observer
Posts:11
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| 11/26/2008 6:11 PM |
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As an executive in the title/escrow industry (however, NOT with LandAmerica), I can address, and clear up, some of your concerns.
The first post referred to "loans (refi's/purchases) to be underwritten by LandAmerica...". Title companies do NOT underwrite loans (lenders do). They research the chain of title, and then insure the accuracy of that research.
All title insurers are required to maintain substantial reserves, so as to honor claims. These reserves are indeed kept separately, and are audited annually by strict governmental agencies, and their balances are added to annually to reflect actual claim experience. LandAmerica was required to add to theirs in 2008 (and did so) - they're quite adequate.
LandAmerica itself (as to its title operations) did NOT declare bankruptcy - only their 1031 Exchange Company (a separate subsidiay) and their holding company. This was done so as to facilitate the acquisition of their title operations by Fidelity National Financial (Fidelity National Title, Chicago Title, Ticor, Alamo Title, etc.). The deal that fell through on Friday was restructured after the due diligence period. Thus, their day-to-day operations will continue as normal. Fidelity has announced that the acquisition should be fully accomplished by the end of the year (subject to regulatory approval).
There may be a minimal disruption in transactions about to close, but nothing worse that a modest delay.
Hopefully, this relieves any anxieties about LandAmerica - however, it is always sad to see such a venerable, old-line company go down.
Interested Observer |
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ElPato
Posts:378
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| 11/29/2008 10:58 AM |
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New Info
Interested Observer, can you take a look at this? It looks like all of LandAmerica went under, can you comment?
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Interested Observer
Posts:11
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| 11/29/2008 3:55 PM |
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ElPato,
According to a quote from Theodore Chandler, LandAmerica CEO "... this sale of our principal domestic title operations to Fidelity National Title in this coordinated Chapter 11 filing ...", you are technically correct when you state that all of LandAmerica went down. However, the Chapter 11 filing was just a technical vehicle for the transfer of the title operations to Fidelity, without all the liability of other parts of the company. Thus, the day-to-day title (and escrow operations) should be only minimally affected, and the viability of the outstanding title policies issued by LandAmerica should not be impacted at all.
Interested Observer |
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Brian
Posts:2626
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| 11/29/2008 4:28 PM |
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I completely agree with Interested Observer.
In a recession, shrewd invvestors would want to buy the assets (or viable divisions) of bankrupt companies at fire sale prices. Why buy whole failing businesses when you cherry pick the best parts?
In the case of LandAmerica, Fidelity was after the title insurance business (not the holding company). Fidelity is the only bidder; and LandAmerica's title operations are in synergy with Fidelity's own title business. There was little chance of anyone else bidding for the LandAmerica's title business. Fidelity did the right thing by their shareholders by waiting to bankruptcy.
I think that the same goes for real estate. One might think that deals abound now. But there will be many more deals out of foreclosure as waves after waves of loans go into default. Like I said before, commercial real estate is next. |
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ElPato
Posts:378
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| 11/29/2008 4:57 PM |
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interested observer/brian:
thanks a lot, that clears things up. |
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