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Senior Notes, Unsecured Revolving Credit Facility and Seller Financed Loans
6 Months Ended
Jun. 30, 2015
Debt Disclosure [Abstract]  
Senior Notes, Unsecured Revolving Credit Facility and Seller Financed Loans

13.

Senior Notes, Unsecured Revolving Credit Facility and Seller Financed Loans

Senior Notes

Senior Notes consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

4.375% Senior Notes due June 15, 2019, net of discount

 

$

445,955

 

 

$

445,501

 

5.875% Senior Notes due June 15, 2024, net of discount

 

 

442,312

 

 

 

442,001

 

Total

 

$

888,267

 

 

$

887,502

 

 

As discussed in Note 2, Merger with Weyerhaeuser Real Estate Company, on the Closing Date, TRI Pointe assumed WRECO’s obligations as issuer of the Senior Notes. The 2019 Notes were issued at 98.89% of their aggregate principal amount and the 2024 Notes were issued at 98.15% of their aggregate principal amount. The net proceeds of $861.3 million, after debt issuance costs and discounts, from the offering were deposited into two separate escrow accounts following the closing of the offering on June 13, 2014.

The 2019 Notes and the 2024 Notes mature on June 15, 2019 and June 15, 2024, respectively. Interest is payable semiannually in arrears on June 15 and December 15. As of June 30, 2015, no principal has been paid on the Senior Notes, and there was $22.1 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Senior Notes that will amortize over the lives of the Senior Notes. Accrued interest related to the Senior Notes was $1.9 million as of June 30, 2015.

Unsecured Revolving Credit Facility

Unsecured revolving credit facility consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Unsecured revolving credit facility

 

$

399,392

 

 

$

260,000

 

In May 2015, the Company amended its unsecured credit revolving credit facility (the “Credit Facility”) from $425 million to $550 million.  The Credit Facility matures on July 1, 2018, and contains a sublimit of $75 million for letters of credit. The Company may borrow under the Credit Facility in the ordinary course of business to fund its operations, including its land development and homebuilding activities. Borrowings under the Credit Facility will be governed by, among other things, a borrowing base. Interest rates on borrowings under the Credit Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.45% to 2.20%, depending on the Company’s leverage ratio. As of June 30, 2015, the outstanding balance under the Credit Facility was $399.4 million with an interest rate of 2.14% per annum and $141.1 million of availability after considering the borrowing base provisions and outstanding letters of credit.  As of June 30, 2015 there was $2.6 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that will amortize over the life of the Credit Facility, maturing on July 1, 2018.  Accrued interest related to the Credit Facility was $685,000 as of June 30, 2015.

At June 30, 2015 we had outstanding letters of credit of $9.5 million.  These letters of credit were issued to secure various financial obligations.  We believe it is not probable that any outstanding letters of credit will be drawn upon.

Seller Financed Loans

Seller financed loans consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Seller financed loans

 

$

12,390

 

 

$

14,677

 

As of June 30, 2015, the Company had $12.4 million outstanding related to seller financed loans to acquire lots for the construction of homes.  Principal and interest payments on these loans are due at various maturity dates, including at the time individual homes associated with the acquired land are delivered.  As of June 30, 2015, the seller financed loans accrue interest at a weighted average rate of 6.97% per annum, with interest calculated on a daily basis. Any remaining unpaid balance on these loans is due in May 2016. Accrued interest on these loans were $25,000 as of June 30, 2015.

Interest Incurred

During the three month periods ended June 30, 2015 and 2014, the Company incurred interest of $15.1 million and $6.6 million, respectively, related to all notes payable, Senior Notes and debt payable to Weyerhaeuser outstanding during the period. Of the interest incurred, $15.1 million and $4.3 million was capitalized to inventory for the six-month period ended June 30, 2015 and 2014, respectively. Included in interest incurred was amortization of deferred financing and Senior Note discount costs of $1.3 million for the three month period ended June 30, 2015 with no deferred financing cost in the same prior year period.  During the six month periods ended June 30, 2015 and 2014, the Company incurred interest of $30.3 million and $10.6 million, respectively, related to all notes payable, Senior Notes and debt payable to Weyerhaeuser outstanding during the period.   Of the interest incurred, $30.3 million and $8.1 million was capitalized to inventory for the period ended June 30, 2015 and 2014, respectively.  Included in interest incurred was amortization of deferred financing and Senior Note discount costs of $2.5 million for the six month period ended June 30, 2015 with no deferred financing cost in the same prior year period.  Accrued interest related to all outstanding debt at June 30, 2015 and December 31, 2014 was $2.6 million and $3.1 million, respectively.  

Covenant Requirements

The Senior Notes contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.

Under the Credit Facility, the Company is required to comply with certain financial covenants, including but not limited to (i) a minimum consolidated tangible net worth; (ii) a maximum total leverage ratio; and (iii) a minimum interest coverage ratio.

The Company was in compliance with all applicable financial covenants as of June 30, 2015 and December 31, 2014.