LV builder sells assets to avoid bankruptcy

Wednesday, May 17, 2000 | 11:10 a.m.

Las Vegas development company Saxton Inc. said Tuesday it's trying to avoid going into bankruptcy or being forced into bankruptcy and is seeking concessions from creditors and contractors.

Saxton's independent auditor, Deloitte & Touche, reported in Saxton's annual report Tuesday: "The company's difficulties in generating sufficient cash flow and making required principal and interest payments ... raise substantial doubt about its ability to continue as a going concern."

Saxton said that while revenue of $130 million in 1999 was up from $92 million in 1998, it lost $30.2 million or $3.90 per share in 1999 vs. a profit a year earlier of $7.7 million or $1.01 per share.

The company builds homes and commercial projects in Nevada, Arizona and Utah.

Saxton reported a cash flow shortage and inability to make debt payments coincided with it halting construction in Nevada and Utah in the first quarter of 2000.

It blamed cash flow problems on:

* Its purchase of Arizona builder Diamond Key Homes in November 1998 for about $12.9 million, including $10.9 million in cash, a portion of which was borrowed.

* Over-expansion.

* Buying land in Utah in 1999 for $4.5 million, partly with high interest rate short-term debt.

* "The company's failure to adequately monitor and manage its cash flow."

Saxton said it hired consultants and attorneys to develop a workout plan that includes:

* Establishing adequate cash management controls.

* Accelerating retirement of debt by selling land and operating properties.

* Negotiating forbearance agreements with lenders, creditors and contractors.

The company also decreased its workforce in the first quarter by 68 employees, or 28 percent.

The cornerstone of the workout plan, Saxton said, is its agreement with lenders to sell assets with a carrying value of about $11.3 million including rights to a 914-acre parcel of undeveloped land in Tucson, Ariz.; an 80-acre parcel of undeveloped land in North Las Vegas and two properties under development in Phoenix.

In exchange for the assets, the lenders will forgive $34.1 million in debt and Saxton will receive an interest in a condominium project, Saxton said.

Saxton stock was unchanged today at 50 cents per share, well off its 52-week high of $6.13.