Standard Pacific shares drop on funding worries

Shares of Irvine-based Standard Pacific Corp. tumbled 13% on Monday on speculation that the home builder’s access to credit might be reduced.

Standard Pacific had said in a regulatory filing Thursday that it was in compliance with the financial requirements of its loans through the first half of 2007. But it warned that it might violate such covenants on some loans should it write down inventory or make additional investments in joint ventures. Violation of a loan’s covenants could allow the lender to seek early repayment.

The company’s stock sank $1.63 to $10.56, giving its outstanding shares a market value of $685.8 million. The stock is down 65% in the last six months.

In addition, the perceived risk of owning Standard Pacific’s bonds soared Monday, according to traders of derivatives who bet on the company’s ability to repay its debt.

“We’re hearing they’re about to violate bank covenants,” said Joseph Saluzzi of Themis Trading in Chatham, N.J.

However, Michael Rehaut, an analyst at JPMorgan Securities Inc., wrote in a report Monday that such credit fears were unfounded.

Standard Pacific executives couldn’t be reached for comment.

The worst housing slump in 16 years has hurt home builders as property values fall and land purchases are abandoned.

The company said in late July that it would ask its banks for more flexibility under the loan covenants.