Debt and Credit Facilities

6 Months Ended

Jun. 30, 2012

Debt and Credit Facilities

Debt and Credit Facilities

Note 10.  Debt and Credit Facilities

The following table presents the composition of the Company’s homebuilder debt and its financial services credit facility at June 30, 2012 and December 31, 2011:

	JUNE 30,			DECEMBER 31,
(in thousands)	2012			2011
Senior notes
6.9 percent senior notes due June 2013	$	167,182		$	167,182
5.4 percent senior notes due January 2015	126,481			126,481
8.4 percent senior notes due May 2017	230,000			230,000
1.6 percent convertible senior notes due May 2018	225,000			-
6.6 percent senior notes due May 2020	300,000			300,000
Total senior notes	1,048,663			823,663
Debt discount	(3,339		)	(3,647		)
Senior notes, net	1,045,324			820,016
Secured notes payable	2,532			3,811
Total debt	$	1,047,856		$	823,827
Financial services credit facility	$	50,271		$	49,933

At June 30, 2012, the Company had outstanding (a) $167.2 million of 6.9 percent senior notes due June 2013; (b) $126.5 million of 5.4 percent senior notes due January 2015; (c) $230.0 million of 8.4 percent senior notes due May 2017; (d) $225.0 million of 1.6 percent convertible senior notes due May 2018; and (e) $300.0 million of 6.6 percent senior notes due May 2020. Each of the senior notes pays interest semiannually and may be redeemed at a stated redemption price, in whole or in part, at the option of the Company at any time.

During the second quarter of 2012, the Company had no debt repurchases. During the second quarter of 2011, the Company paid $28.2 million to repurchase $27.5 million of its 5.4 percent senior notes due 2015, resulting in a loss of $857,000. The loss resulting from this debt repurchase was included in “Loss related to early retirement of debt, net” within the Consolidated Statements of Earnings.

During the second quarter of 2012, the Company issued $225.0 million of 1.6 percent convertible senior notes due May 2018. The Company will pay interest on the notes on May 15 and November 15 of each year, commencing on November 15, 2012. The notes, which mature on May 15, 2018, are initially convertible into shares of the Company’s common stock at a conversion rate of 31.2 shares per $1,000 of their principal amount. This corresponds to an initial conversion price of approximately $32.03 per share and represents a conversion premium of approximately 42.5 percent based on the closing price of the Company’s common stock on May 10, 2012, which was $22.48 per share. The conversion rate is subject to adjustment upon the occurrence of certain events. The notes are fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company’s 100 percent-owned homebuilding subsidiaries (the “Guarantor Subsidiaries”). The Company received net proceeds of $218.8 million from this offering prior to offering expenses. In July 2012, the Company redeemed and repurchased $167.2 million of its 6.9 percent senior notes due 2013 for $177.2 million in cash. It recognized a charge of $9.1 million resulting from the redemption, which will be included in “Loss related to early retirement of debt, net” within the Consolidated Statements of Earnings. (See Note 19, “Subsequent Events.”) The remaining proceeds will be used for general corporate purposes.

To provide letters of credit required in the ordinary course of its business, the Company has various secured letter of credit agreements that require it to maintain restricted cash deposits for outstanding letters of credit. Outstanding letters of credit totaled $37.9 million and $66.0 million under these agreements at June 30, 2012 and December 31, 2011, respectively.

To finance its land purchases, the Company may also use seller-financed nonrecourse secured notes payable. At June 30, 2012 and December 31, 2011, outstanding seller-financed nonrecourse secured notes payable totaled $2.5 million and $3.8 million, respectively.

Senior notes and indenture agreements are subject to certain covenants that include, among other things, restrictions on additional secured debt and the sale of assets. The Company was in compliance with these covenants at June 30, 2012.

In 2011, RMC entered into a $50.0 million repurchase credit facility with JPMorgan Chase Bank, N.A. (“JPM”). This facility is used to fund, and is secured by, mortgages that were originated by RMC and are pending sale. This facility will expire in December 2012. In May 2012, the credit facility was increased to $60.0 million. Under the terms of this facility, RMC is required to maintain various financial and other covenants and to satisfy certain requirements relating to the mortgages securing the facility. At June 30, 2012, the Company was in compliance with these covenants. Outstanding borrowings against this credit facility totaled $50.3 million and $49.9 million at June 30, 2012 and December 31, 2011, respectively.