Note 4—Restructuring and Impairment
On February 19, 2008, the Company announced a restructuring of JWH Holding Company, LLC, the Company's Financing and Homebuilding business. Thirty-six underperforming Jim Walter Homes sales centers have been closed as part of the restructuring. As a result, the Company recorded a restructuring charge of $6.8 million in the first quarter of 2008, in Homebuilding, of which $4.3 million related to impairments of property, plant and equipment, $1.7 million related to severance obligations due to a 25 percent reduction in workforce at Homebuilding and $0.8 million related to lease obligations of closed sales centers. This charge appears as restructuring and impairment charges in the statements of income.
Mortgage-Backed and Asset-Backed Notes and Variable Funding Loan Facilities
At the beginning of the second quarter of 2008, the Company had two variable funding loan facilities ("warehouse facilities") totaling $350.0 million that provided temporary warehouse financing to Walter Mortgage Company ("WMC") for its current purchases of instalment notes and mortgages originated by Homebuilding.
On April 30, 2008, the Company repaid all outstanding borrowings and terminated these facilities using proceeds from the amended 2005 Walter Credit Agreement, as discussed above. With the termination of the warehouse facilities, the Company is no longer reliant on the availability of mortgage warehouse facilities or the mortgage-backed securitization market.
In addition, after May 1, 2008, WMC is no longer providing financing to new customers of Homebuilding. However, substantially all of the backlog of homes with signed contracts and those which were under construction as of May 1, 2008, were or are expected to be completed over the next six months and financed by WMC. The Company will finance these WMC instalment notes receivable with operating cash flows or funds from borrowings under the revolving credit facility. Homebuilding is transitioning to a third-party financing model including the use of government-sponsored loan programs.
