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Debt
3 Months Ended
Mar. 31, 2014
Debt Disclosure [Abstract]  
Debt

9. DEBT

Senior notes and other borrowings consist of the following (in thousands):

 

     At March 31,
2014
     At December 31,
2013
 

7.75% Senior Notes due 2020, with $10.2 million and $10.6 million of unamortized debt issuance costs at March 31, 2014 and December 31, 2013, respectively and includes $3.9 million and $4.1 million of unamortized bond premium at March 31, 2014 and December 31, 2013, respectively

   $ 489,333       $ 489,497   

5.25% Senior Notes due 2021, with $8.4 million and $8.7 million of unamortized debt issuance costs at March 31, 2014 and December 31, 2013, respectively

     550,000         550,000   

5.625% Senior Notes due 2024, with $4.9 million of unamortized debt issuance costs at March 31, 2014

     350,000         —    

$400 million Restated Revolving Credit Facility

     —          —    

Mortgage borrowings – Flagstar Agreement

     32,972         38,084   

Mortgage borrowings – Comerica Agreement

     18,947         36,808   
  

 

 

    

 

 

 

Total Senior Notes and bank financing

   $ 1,441,252       $ 1,114,389   
  

 

 

    

 

 

 

Unamortized debt issue costs related to the 2020, 2021 and 2024 Senior Notes are included in prepaid expenses and other assets, net in the accompanying Condensed and Consolidated Balance Sheets and are amortized to interest expense in the accompanying Condensed and Consolidated Statements of Operations.

2020 Senior Notes

On April 13, 2012, TMC and Monarch Communities Inc. (together, the “Bond Co-Issuers”) issued $550.0 million of 7.75% Senior Notes due 2020 (the “Initial Notes”) at an initial offering price of 100% of the principal amount (the “Offering”). The net proceeds from the sale of the Initial Notes were $537.4 million, net of debt issuance costs of $12.6 million, and were used, in part, to repay existing indebtedness. The remaining proceeds of approximately $187.4 million from the Offering were used by the Bond Co-Issuers for general corporate purposes. An additional $3.0 million of issuance costs were settled outside the bond proceeds.

On August 21, 2012, the Bond Co-Issuers issued an additional $125.0 million of 7.75% Senior Notes due 2020 (the “Additional Notes” together with the Initial Notes the “2020 Senior Notes”) at an initial offering price of 105.5% of the principal amount. The Bond Co-Issuers received $132.5 million including prepaid interest, net of debt issuance costs of $3.1 million. The net proceeds were used for general corporate purposes. The Additional Notes issued August 21, 2012 were issued pursuant to the existing indenture for the 2020 Senior Notes. The 2020 Senior Notes are unsecured and not subject to registration rights.

 

On April 12, 2013, TMHC used $204.3 million of the net proceeds of the IPO to acquire New TMM Units from New TMM (at a price equal to the price paid by the underwriters for shares of Class A Common Stock in the IPO). TMM Holdings used these proceeds to repay a portion of the 2020 Senior Notes.

Obligations to pay principal and interest on the 2020 Senior Notes are guaranteed by TMM Holdings, Taylor Morrison Holdings, Inc., Monarch Parent Inc. and the U.S. homebuilding subsidiaries of Taylor Morrison Communities, Inc. (collectively, the “Guarantors”), each of which is directly or indirectly 100.0% owned by TMM Holdings. Such guarantees are full and unconditional, and joint and several. We do not provide separate financial statements of the Guarantors or condensed consolidating financial information because the 2020 Senior Notes are not registered and are not subject to registration rights. The 2020 Senior Notes and the guarantees are senior unsecured obligations of the Bond Co-Issuers and the Guarantors. The indenture for the 2020 Senior Notes contains covenants that limit (i) the making of investments, (ii) the payment of dividends and the redemption of equity and junior debt, (iii) the incurrence of additional indebtedness, (iv) asset dispositions, (v) mergers and similar corporate transactions, (vi) the incurrence of liens, (vii) the incurrence of prohibitions on payments and asset transfers among the issuers and restricted subsidiaries and (viii) transactions with affiliates, among others. The indenture governing the 2020 Senior Notes contains customary events of default. If we do not apply the net cash proceeds of certain asset sales within specified deadlines, we will be required to offer to repurchase the 2020 Senior Notes at par (plus accrued and unpaid interest) with such proceeds. We are also required to offer to repurchase the 2020 Senior Notes at a price equal to 101% of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events.

2021 Senior Notes

On April 16, 2013, the Bond Co-Issuers issued $550.0 million aggregate principal amount of 5.25% Senior Notes due 2021 (the “2021 Senior Notes”). The 2021 Senior Notes are unsecured and are not subject to registration rights. The net proceeds from the issuance of the 2021 Senior Notes were $541.7 million net of $8.3 million of debt issuance costs, were used by the Bond Co-Issuers to repay the outstanding balance under the Restated Revolving Credit Facility and for general corporate purposes, including the purchase of additional land inventory.

The 2021 Senior Notes are guaranteed by the same Guarantors that guarantee the 2020 Senior Notes. The indenture governing the 2021 Senior Notes contains covenants, change of control and asset sale offer provisions that are similar to those contained in the indenture governing the 2020 Senior Notes.

2024 Senior Notes

On March 5, 2014, the Bond Co-Issuers issued $350.0 million aggregate principal amount of 5.625% Senior Notes due 2024 (the “2024 Senior Notes”). The 2024 Senior Notes are unsecured and are not subject to registration rights. The approximate net proceeds from the issuance of the 2024 Senior Notes were $345.3 million, net of approximately $4.7 million of debt issuance costs, were used by the Bond Co-Issuers to repay the outstanding balance under the Restated Revolving Credit Facility and for general corporate purposes.

The 2024 Senior Notes will mature on March 1, 2024. The 2024 Senior Notes are guaranteed by the same Guarantors that guarantee the 2020 and 2021 Senior Notes. The indenture governing the 2024 Senior Notes contains covenants that limit the ability of the Bond Co-Issuers and the Guarantors to incur debt secured by liens and enter into certain sale and leaseback transactions. The indenture governing the 2024 Senior Notes contains events of default that are similar to those contained in the indentures governing the 2020 and the 2021 Senior Notes. The change of control provisions in the indenture governing the 2024 Senior Notes are similar to those contained in the indentures governing the 2020 and 2021 Senior Notes, but certain ratings events must also occur in connection with the change of control before the repurchase offer requirement is triggered for the 2024 Senior Notes.

Prior to December 1, 2023, the 2024 Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through December 1, 2023 (plus accrued and unpaid interest). Beginning on December 1, 2023, the 2024 Senior Notes are redeemable at par (plus accrued and unpaid interest).

Restated Revolving Credit Facility

On January 15, 2014, TMC and various other subsidiaries of TMHC (collectively, the “Borrowers”), entered into Amendment No. 1 to the Restated Revolving Credit Facility. This Amendment No. 1 released Monarch from all of its obligations under the Restated Revolving Credit Facility. As a result, the only borrower under the Restated Revolving Credit Facility is TMC. The Restated Revolving Credit Facility is guaranteed by the same Guarantors that guarantee the 2020 Senior Notes.

The maximum debt to total capitalization ratio is 0.60 to 1.00. The ratio as calculated by the Borrowers at March 31, 2014 was 0.44 to 1.00. The minimum consolidated tangible net worth requirement was $1.2 billion at March 31, 2014. At March 31, 2014, the Borrowers’ tangible net worth, as defined in the Restated Revolving Credit Facility, was $1.5 billion.

 

There were no outstanding borrowings under the Restated Revolving Credit Facility at March 31, 2014 or December 31, 2013. As of March 31, 2014, the Borrowers had $364.2 million of availability for borrowings including $164.2 million of availability for letters of credit (giving effect to $35.8 million of letters of credit outstanding as of such date).

Mortgage Company Loan Facilities

Borrowings under our two TMHF warehouse facilities are accounted for as a secured borrowing under ASC Topic 860, Transfers and Servicing. The mortgage borrowings outstanding as of March 31, 2014 and December 31, 2013, are collateralized by $73.8 million and $95.7 million, respectively, of mortgage loans held for sale, which comprise the balance of mortgage receivables and $0.0 million and $2.0 million, respectively of restricted short-term investments in certificate of deposits known as CDARS, which are included in restricted cash in the accompanying Condensed and Consolidated Balance Sheets. Total availability under the TMHF warehouse facilities available to TMHC at March 31, 2014 is $83.0 million.

Loans, Letters of Credit, Surety Bonds and Guarantees

In the course of land development and acquisition, we have issued letters of credit under our Restated Revolving Credit Facility to various land sellers and municipalities in the amount of $35.8 million, with a sub-limit of $200.0 million.

Through our subsidiaries, we are committed, under various loans, letters of credit and surety bonds, to perform certain development and construction activities and provide certain guarantees in the normal course of business. These guarantees have been made in connection with joint venture funding of our operations in Canada. Loans, outstanding letters of credit and surety bonds under these arrangements, including our share of responsibility for arrangements with our joint ventures, totaled $202.4 million and $212.2 million as of March 31, 2014 and December 31, 2013, respectively. Although significant development and construction activities have been completed related to these site improvements, the letters of credit and surety bonds are reduced as development and construction work is completed, but not fully released until warranty periods have expired.

Monarch is party to a credit facility with The Toronto-Dominion Bank (“TD Facility”). The TD Facility provides borrowings, including letters of credit, of up to CAD $100.0 million or its U.S. dollar equivalent in support of Monarch projects. Under the terms of the TD Facility, the first CAD $80.0 million drawn under the facility is secured by liens on the interests of Monarch in certain Canadian real property. Amounts drawn above CAD $80.0 million are secured with cash. There was a total of CAD $61.3 million and CAD $65.2 million of letters of credit outstanding under the TD Facilities as of March 31, 2014 and December 31, 2013, respectively. Monarch also guarantees the credit facilities that certain joint ventures are party to with the Toronto-Dominion Bank with availability of $32.6 million and $34.6 million at March 31, 2014 and December 31, 2013, respectively, which is in addition to the TD facility noted above. There was a total of $31.2 million and $33.3 million of letters of credit outstanding under joint venture credit facilities as of March 31, 2014 and December 31, 2013, respectively.

Monarch is also party to a credit facility with HSBC Bank Canada (“HSBC Facility”). The HSBC Facility provides a letter of credit facility of up to CAD $24.2 million as of March 31, 2014 in support of Monarch’s construction projects. Under the terms of the HSBC Facility, amounts drawn under this facility are secured by liens over the interests of Monarch in certain Canadian real property or cash. There were CAD $17.4 million and CAD $18.0 million letters of credit outstanding under the HSBC Facility as of March 31, 2014 and December 31, 2013, respectively.

Both the TD Facility and the HSBC Facility are 364-day facilities that expire on June 30th each year. Both Facilities have been renewed and extended to June 30, 2014 on terms substantially similar to those in effect prior to the renewal.