Home builder Beazer Homes USAsaid Friday it received default notices related to senior notes from U.S. Bank, the trustee for the notes, sending its shares down as much as 13 percent.
Beazer , which faces a deteriorating U.S. housing market as well as two separate probes related to its mortgage-origination business, said it believes the default notices are "invalid and without merit."
U.S. Bancorp, parent of U.S. Bank, declined to comment.
Independent credit rating firm Egan-Jones Ratings Co. said there was "blood in the water."
"The delay in the 10Q filing is a concern," Egan-Jones said in a research note. "Beazer needs to provide answers on its credit strength soon."
Last month Beazer sued U.S. Bank in federal court in Atlanta, seeking a ruling that a delay in filing its 10Q quarterly financial report did not constitute a default on $1.3 billion of outstanding notes.
As a trustee, U.S. Bank acts as middleman between Beazer and its bondholders, providing administrative services such as distributing interest payments. It also passes on notices of default if certain conditions are not met. The bank does not necessarily have lending exposure to Beazer.
According to Beazer, U.S. Bank said in the default notices that the company is in default because it has not yet filed its quarterly report for the period ended June 30, the company's fiscal third quarter. The notices allege the defaults will become "events of default" if not remedied within 60 days.
The Atlanta-based home builder said its agreements related to the notes require delivery of quarterly reports to U.S. Bank within 15 days of their submission to regulators. It previously said it had delivered every quarterly report as required and had never missed a bond payment.
Beazer said on Aug. 15 that the delay in filing its quarterly report was due to internal probes into its mortgage origination business.
It also said last month that its former chief accounting officer, who was fired, may have caused reserves and other accrued liabilities to have been recorded in prior accounting periods above what is allowed under generally accepted accounting principles. The company said resolution of the issue would not affect its reported cash position.
In July, Beazer disclosed that U.S. regulators were investigating possible violations by the company of securities laws.
Earlier this year, Beazer disclosed it was the subject of several lawsuits as well an informal Securities and Exchange Commission probe and a federal prosecutor's investigation into practices in its mortgage business.
Beazer shares fell as low as $9.50 in morning trade and were down $1.07 to $9.84 in midday trade on the New York Stock Exchange.
The company's bonds also fell. Its 8.625 percent bond due 2011 fell 1.75 cents to 79 cents on the dollar, according to MarketAxess.