August 17, 2007, Dallas, TX - (Business Wire) -Home Solutions of America, Inc. (NASDAQ: HSOA; the “Company” or “Home Solutions"), a provider of restoration, construction and interior services to commercial and residential customers, updated shareholders today regarding the settlement status of its $21.65 million note (the “Note") and credit agreement. There is no Event of Default as a result of the Company entering into the Note agreement with Brian Marshall, a director and the Executive Vice President of the Company, and the Company is able to borrow under its credit facility.
The Company entered into an agreement (the “Agreement") with Marshall, which resolved the Note which was issued to Mr. Marshall in partial consideration for the Company’s acquisition (the “Acquisition") of the capital stock of Fireline Restoration, Inc. ("Fireline"). The Agreement was modified from the previous agreement in principle, after discussions with the Company’s lenders, to make it more favorable to the Company and the lenders. Under the Agreement, Home Solutions receives the first $9 million of net proceeds collected from receivables that were assumed by the Florida Insurance Guarantee Association ("FIGA), an entity created by the Florida legislature to handle claims of insolvent property and casualty companies. Under the previous agreement, Mr. Marshall and the Company were to share equally in the first $14 million of net proceeds collected from FIGA.
The Company recognizes that lender consent is required before any funds are transferred to Mr. Marshall. However, no proceeds have been collected from FIGA subsequent to the signing of the Agreement, and no payments have been made to Mr. Marshall under the Agreement. It is currently in advanced discussions with its lenders to receive a waiver, which will enable it to make payments to Mr. Marshall if the receivables are collected. In the event that the lenders do not consent to the agreement, Mr. Marshall and the Company intend to restructure the agreement in order to comply with the covenants contained in its credit agreement.
“We have an excellent relationship with our lenders and are confident that we will reach a speedy resolution,” said Frank Fradella, Chairman and CEO of Home Solutions. “However, if we are unable to, we would restructure Marshall’s agreement to avoid an event occurring which could trigger a default.”
The Company also noted that its Audit Committee is conducting an independent review of all related party transactions. The Company’s management believes that these transactions were entered into on terms that were comparable to what unrelated third parties transacting similar business with the Company would have received.
About Home Solutions of America, Inc.
Home Solutions of America, Inc. is a provider of restoration, construction and interior services to commercial and residential customers. Its Fireline subsidiary is involved in providing construction services, rebuilding, catastrophic storm response and contents restoration for commercial, industrial and residential properties. Based in Tampa, Fireline is certified in multiple aspects of the restoration industry, including smoke, fire, water and mold. The Company has operations in California, Texas, Florida, Alabama, Georgia, Louisiana, Mississippi and North Carolina. Home Solutions Restoration of Louisiana, Inc., which does business as Associated Contractors ("Associated"), is a Louisiana based commercial, industrial and residential contractor working in the governmental and private arenas. Associated has been one of the larger players in redeveloping public schools in the aftermath of Hurricane Katrina. Its clients include the State of Louisiana, the City of New Orleans, the Louisiana National Guard, the historic French Market, Louis Armstrong International Airport and the N.A.S.A. Stennis Space Center in Mississippi. For additional information, please visit the Company’s Web site at http://www.hsoacorp.com.
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Cautionary Notice
Statements included in this update that are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended by Public Law 104-67. Forward-looking statements may be identified by words including “anticipate,” “believe,” “intends,” “estimates,” “expect,” and similar expressions. The Company cautions readers that forward-looking statements including, without limitation, those relating to the Company’s future business prospects, contracts to be performed,and new opportunities associated with the anticipated rebuilding of the New Orleans area, consents from lenders, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors such as those relating to economic, governmental, technological, and other risks and factors identified from time to time in the Company’s reports filed with the SEC.
