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Notes Payable
9 Months Ended
Sep. 30, 2014
Debt Disclosure [Abstract]  
Notes Payable
NOTES PAYABLE
Secured Revolving Credit Agreement
On April 28, 2014, the Company entered into a credit agreement with Texas Capital Bank, N.A. and a syndication of lenders (the “Credit Agreement”) to provide a $135.0 million senior secured revolving credit facility, which could be increased by request of the Company, to $200.0 million, subject to the terms and provisions of the Credit Agreement. On July 31, 2014, amounts available to the Company under the Credit Agreement were increased by $40.0 million to $175.0 million, and on September 30, 2014, amounts available to the Company under the Credit Agreement were increased from $175.0 million to $200.0 million, in each case, in accordance with the accordion feature of the Credit Agreement.
The Credit Agreement matures on April 28, 2017. Borrowings under the credit facility are limited to the borrowing base, which is based on the loan value of the pool of collateral in which the lenders have a security interest. The Company may add houses, vacant lots, land, and acquisition and development projects to its pool of collateral through April 28, 2015. The loan value of speculative houses, pre-sold houses, model houses, vacant lots, land, and acquisition and development projects is adjusted based on formulas with respect to each of those categories of collateral; the loan value of the collateral decreases based on the amount of time such collateral is in the borrowing base. During the period May 1, 2015 to April 28, 2016, advances will continue to be made for assets previously included in the pool of collateral as they move into higher funding categories. Speculative homes may remain in the borrowing base for up to 18 months. Vacant lots, land and acquisition and development projects may remain in the borrowing base for up to three years. As of September 30, 2014, the borrowing base was $175.4 million, of which $160.2 million was outstanding and the remaining $15.2 million was available to borrow.
The Credit Agreement contains various financial covenants including a minimum EBITDA to debt service payments ratio; a debt to capitalization ratio; a leverage ratio; liquidity ratio and ratio of value of all land, lots, and acquisition and development projects to net worth; and a net worth ratio. In addition, the Credit Agreement contains various covenants that, among other restrictions, limit the amount of the Company's additional debt.
On September 30, 2014, certain provisions of the Credit Agreement were modified and supplemented. The modification of the Credit Agreement increased each of the Combined Acquisition and Development ("A&D") and Entitled Land Subfacility, the Combined A&D, Entitled Land and Lot Inventory Subfacility, and the Entitled Land Subfacility; modified certain of the Credit Agreement financial covenants, which are generally tested on a quarterly basis; and allows the Company to incur up to $85.0 million of unsecured subordinated indebtedness. In addition, the debt to capitalization ratio, leverage ratio, EBITDA ratio and liquidity rate were also modified. At September 30, 2014, the Company was in compliance with all of the covenants contained in the Credit Agreement.
 
 
September 30,
 
December 31,
   
 
2014
 
 2013
 
 
(in thousands)
LGI Homes, Inc.—Notes payable to Texas Capital Bank, N.A. and a syndication of lenders under the Credit Agreement ($200 million line at September 30, 2014) maturing through April 28, 2017; interest paid monthly at LIBOR plus 2.75%, with a 3.75% floor; collateralized by the Company and its subsidiaries' land, development and home construction costs
 
$
160,188

 
$

LGI Homes Group, LLC—Notes payable to Texas Capital Bank, N.A. under a credit facility ($35 million line at December 31, 2013) expiring June 30, 2015; interest at LIBOR plus 3.0%, with a 4.0% floor; collateralized by borrower's land, development and home construction costs (carrying value of $106.1 million at December 31, 2013); guaranteed by a Family Principal, the managing member, and non-managing members as joint and several guarantors at December 31, 2013; the credit facility was paid in full in April 2014
 

 
34,078

LGI Homes—Sunrise Meadow, LLC—Notes payable to Texas Capital Bank, N.A. under a credit facility ($2 million at December 31, 2013) expiring December 31, 2013; interest at LIBOR plus 3.9%, with a 4.0% floor; collateralized by borrower's land, development and home construction costs (carrying value of $5.1 million at December 31, 2013); guaranteed by a Family Principal; the credit facility was paid in full in April 2014
 

 
1,457

Total notes payable
 
$
160,188

 
$
35,535


At September 30, 2014 and December 31, 2013, LIBOR was 0.23% and 0.24%, respectively. Based on the terms of the variable rate notes payable, the interest rates as of September 30, 2014 and December 31, 2013, were based on the interest rate floor terms.
Capitalized Interest
Interest activity, including other financing costs, for notes payable for the periods presented is as follows (in thousands):   
   
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
   
 
2014
 
2013
 
2014
 
2013
Interest incurred
 
$
1,586

 
$
385

 
$
3,263

 
$
923

Less: Amounts capitalized
 
(1,586
)
 
(344
)
 
$
(3,263
)
 
$
(876
)
Interest expense
 
$

 
$
41

 
$

 
$
47

 
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
1,085

 
$
281

 
$
2,520

 
$
769



Included in interest incurred was amortization of deferred financing costs of $0.3 million and $0.6 million for the three and nine months ended September 30, 2014, respectively.