NOTES PAYABLE

The Company’s notes payable at their principal amounts, net of any unamortized discounts, consist of the following:



	September 30,
	2014		2013
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility, maturing 2019	$	300.0	$	—
6.125% senior notes due 2014, net	—		145.8
2% convertible senior notes due 2014, net	—		478.7
5.625% senior notes due 2014, net	—		137.8
5.25% senior notes due 2015, net	157.7		157.5
5.625% senior notes due 2016, net	169.9		169.7
6.5% senior notes due 2016, net	372.6		372.5
4.75% senior notes due 2017	350.0		350.0
3.625% senior notes due 2018	400.0		400.0
3.75% senior notes due 2019	500.0		—
4.375% senior notes due 2022	350.0		350.0
4.75% senior notes due 2023	300.0		300.0
5.75% senior notes due 2023	400.0		400.0
Other secured	23.4		8.4
	$	3,323.6	$	3,270.4
Financial Services:
Mortgage repurchase facility, maturing 2015	$	359.2	$	238.6

As of September 30, 2014, maturities of consolidated notes payable, assuming the mortgage repurchase facility is not extended or renewed, are $522.4 million in fiscal 2015, $543.5 million in fiscal 2016, $350.6 million in fiscal 2017, $400.6 million in fiscal 2018, $800.6 million in fiscal 2019 and $1,065.5 million in maturities thereafter.

Homebuilding:

The Company has a senior unsecured revolving credit facility which was amended in August 2014 to increase its capacity from $725 million to $975 million and to extend its maturity date to September 7, 2019. The facility has an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to approximately 50% of the revolving credit commitment. Letters of credit issued under the facility reduce the available borrowing capacity. The interest rate on borrowings under the revolving credit facility may be based on either the Prime Rate or London Interbank Offered Rate (LIBOR) plus an applicable margin, as defined in the credit agreement governing the facility. At September 30, 2014, the Company had $300.0 million of borrowings outstanding at a 2.9% annual interest rate and $92.7 million of letters of credit issued under the revolving credit facility.

The Company's revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a minimum level of tangible net worth, a maximum allowable ratio of debt to tangible net worth and a borrowing base restriction if the Company's ratio of debt to tangible net worth exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. In addition, the credit agreement governing the facility and the indentures governing the senior notes impose restrictions on the creation of secured debt and liens. At September 30, 2014, the Company was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and public debt obligations.

The Company has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in September 2012, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

On January 15, 2014, the Company repaid the remaining $145.9 million principal amount of its 6.125% senior notes which were due on that date. On September 15, 2014, the Company repaid the remaining $137.9 million principal amount of its 5.625% senior notes which were due on that date. In February 2014, the Company issued $500.0 million principal amount of 3.75% senior notes due March 1, 2019.

During April and May of 2014, the Company's outstanding 2% convertible senior notes were converted into 38.6 million shares of the Company's common stock. The conversion rate was 77.18004 shares of the Company's common stock per $1,000 principal amount of senior notes, which was equivalent to a conversion price of approximately $12.96 per share of common stock.

The key terms of each of the Company’s senior notes outstanding as of September 30, 2014 are summarized below.



Note Payable	Principal Amount	Date Issued	Date Due	Redeemable Prior to Maturity		Effective Interest Rate (1)
	(In millions)
5.25% senior	$157.7	February 2005	February 15, 2015	Yes	(2)	5.4%
5.625% senior	$170.2	December 2004	January 15, 2016	Yes	(2)	5.8%
6.5% senior	$372.7	April 2006	April 15, 2016	Yes	(2)	6.6%
4.75% senior	$350.0	May 2012	May 15, 2017	Yes	(2)	5.0%
3.625% senior	$400.0	February 2013	February 15, 2018	Yes	(2)	3.8%
3.75% senior	$500.0	February 2014	March 1, 2019	Yes	(2)	3.9%
4.375% senior	$350.0	September 2012	September 15, 2022	Yes	(2)	4.5%
4.75% senior	$300.0	February 2013	February 15, 2023	Yes	(2)	4.9%
5.75% senior	$400.0	August 2013	August 15, 2023	Yes	(2)	5.9%

______________


(1)	Interest is payable semi-annually on each of the series of senior notes. The annual effective interest rate is calculated after giving effect to the amortization of the financing costs and any discount associated with the note issuance.


(2)	The Company may redeem the notes in whole at any time or in part from time to time, at a redemption price equal to the greater of 100% of their principal amount or the present value of the remaining scheduled payments on the redemption date, plus accrued interest.

All series of senior notes and borrowings under the revolving credit facility are senior obligations and rank pari passu in right of payment to all existing and future unsecured indebtedness, and senior to all existing and future indebtedness expressly subordinated to them. The senior notes and borrowings under the revolving credit facility are guaranteed by substantially all of the Company’s homebuilding subsidiaries. Upon the occurrence of both a change of control of the Company and a ratings downgrade event, as defined in the indentures governing $2.3 billion principal amount of its senior notes as of September 30, 2014, the Company would be required in certain circumstances to offer to repurchase these notes at 101% of their principal amount, along with accrued and unpaid interest. Also, a change of control as defined in the revolving credit facility would constitute an event of default under the revolving credit facility, which could result in the acceleration of any borrowings outstanding under the facility and the termination of the commitments thereunder.

Effective August 1, 2014, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities effective through July 31, 2015. All of the $500 million authorization was remaining at September 30, 2014.

Financial Services:

The Company’s mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that is accounted for as a secured financing. The mortgage repurchase facility provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties against the transfer of funds by the counterparties, thereby becoming purchased loans. DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 120 days in accordance with the terms of the mortgage repurchase facility. The total capacity of the facility is $300 million; however, the capacity can be increased up to $400 million subject to the availability of additional commitments. In February 2014, the mortgage repurchase facility was renewed and amended. This renewal and amendment extends the maturity date of the facility to February 27, 2015 and allows for the capacity of the facility to be increased, without requiring additional commitments, from $300 million to $325 million on the last five days of any fiscal quarter and the first twenty-five days of the following fiscal quarter, excluding the quarter ending December 31, 2014. Through an additional commitment obtained in September 2014, the capacity of the facility was temporarily increased to $400 million until October 24, 2014.

As of September 30, 2014, $448.1 million of mortgage loans held for sale with a collateral value of $429.0 million were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling $69.8 million, DHI Mortgage had an obligation of $359.2 million outstanding under the mortgage repurchase facility at September 30, 2014 at a 2.6% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable ratio of debt to tangible net worth and its minimum required liquidity. These covenants are measured and reported monthly. At September 30, 2014, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.