SOURCE: Tarragon Corporation

March 27, 2008 18:44 ET

Tarragon Obtains Standstill Agreement From Holders of $125 Million of Corporate-Level Unsecured Subordinated Notes

NEW YORK, NY--(Marketwire - March 27, 2008) - Tarragon Corporation (NASDAQ: TARR), a leading mixed-use developer with a focus on for rent and for sale multifamily housing, today announced that it has obtained a standstill agreement from the holders of its $125 million of corporate-level unsecured subordinated notes, and that the Company has been granted an option to purchase the subordinated notes at a discount.

The standstill agreement is effective through September 30, 2009 and includes a related waiver of compliance with the financial covenants applicable to the subordinated notes during the standstill period. In addition, Tarragon has been granted a 270-day option to purchase the subordinated notes from the holders at a discount, depending on when the option is exercised. The holders of the subordinated notes granted the waiver and the repurchase option in exchange, among other things, for the agreement by William S. Friedman, the Company's Chairman and Chief Executive Officer, and Robert P. Rothenberg, the Company's President and Chief Operating Officer, to subordinate approximately $37 million of outstanding promissory notes owed by Tarragon to the executives to the $125 million of subordinated notes. The executives have also agreed to limit future cash compensation, including interest payments on their notes, until the subordinated notes are retired.

In consideration of the executives' agreement to subordinate their promissory notes and the anticipated benefits to the Company of the option to repurchase the $125 million of subordinated notes at a discount, a special committee of independent Tarragon directors has approved the issuance to the executives of warrants to purchase an aggregate of 3.5 million shares of Tarragon common stock. The warrants have a five-year term and an exercise price of $2.35 per share. In addition, the terms of the executives' outstanding promissory notes have been amended to provide for an increase in the annual interest rate payable to 12.5% to reflect the subordination, with the cash component of such interest capped at 5% as long as the subordination agreement remains in effect, and as amended the promissory notes would mature on the later of March 27, 2014 or two years after the $125 million of subordinated notes have been retired.

Forward-looking Statements

Information in this press release includes "forward-looking statements" made pursuant of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are based on management's expectations, estimates, projections and assumptions. Words such as "may," "expects," "anticipates," "intends," "estimates," and variations of these words and similar expressions are intended to identify forward-looking statements, which include but are not limited to the expectation that the Company will be able to repurchase the subordinated notes at a discount. Actual results and the timing of certain events could differ materially from those projected or contemplated by these forward-looking statements due to a number of factors, including conditions in the homebuilding industry and residential real estate and mortgage markets, business opportunities that may be available to Tarragon, conditions in the capital and financial markets generally, general economic conditions, interest rates and other risk factors outlined in Tarragon's SEC reports, including its Annual Report on Form 10-K and other SEC reports. Tarragon assumes no responsibility to update forward-looking information contained in this press release.

About Tarragon Corporation

Tarragon Corporation is a leading developer of multifamily housing for rent and for sale. Tarragon's operations are concentrated in the Northeast, Florida, Texas and Tennessee. To learn more about Tarragon Corporation, visit: www.tarragoncorp.com.

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Contact Information

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    Alan H. Oshiki
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