Notes Payable

9 Months Ended

Jun. 30, 2019

The Company’s notes payable at their carrying amounts consist of the following:



	June 30, 2019		September 30, 2018
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility, maturing 2023	$	150.0	$	—
3.75% senior notes due 2019 (1)	—		499.6
4.0% senior notes due 2020 (1)	499.4		498.8
2.55% senior notes due 2020 (1)	398.6		397.9
4.375% senior notes due 2022 (1)	348.7		348.4
4.75% senior notes due 2023 (1)	298.9		298.7
5.75% senior notes due 2023 (1)	398.2		398.0
Other secured notes	97.5		4.5
	2,191.3		2,445.9
Forestar:
Unsecured:
Revolving credit facility, maturing 2021	—		—
3.75% convertible senior notes due 2020 (2)	119.3		119.9
8.0% senior notes due 2024 (3)	343.5		—
	462.8		119.9
Financial Services:
Mortgage repurchase facility, maturing 2020	796.5		637.7
	$	3,450.6	$	3,203.5

_______________


(1)	Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $6.1 million and $8.5 million at June 30, 2019 and September 30, 2018, respectively.


(2)	Forestar’s 3.75% convertible senior notes due 2020 include an unamortized fair value adjustment of $3.9 million and $8.2 million at June 30, 2019 and September 30, 2018, respectively.


(3)	Debt issuance costs that were deducted from the carrying amount of Forestar’s 8.0% senior notes totaled $6.5 million at June 30, 2019.

Homebuilding:

The Company has a $1.325 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.9 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. The maturity date of the facility is September 25, 2023. Borrowings and repayments under the facility were $2.1 billion and $1.95 billion, respectively, during the nine months ended June 30, 2019. At June 30, 2019, there were $150 million of borrowings outstanding at a 3.6% annual interest rate and $138.9 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 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. The credit agreement governing the facility and the indenture governing the senior notes also impose restrictions on the creation of secured debt and liens. At June 30, 2019, the Company was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and public debt obligations.

D.R. Horton has an automatically effective universal shelf registration statement filed with the SEC in August 2018, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

On March 1, 2019, the Company repaid $500 million principal amount of its 3.75% senior notes at maturity.

Effective August 1, 2018, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities effective through September 30, 2019, all of which was remaining at June 30, 2019. In July 2019, the Board of Directors renewed the $500 million debt repurchase authorization with no expiration date.

Forestar:

Forestar has a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $570 million, 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 the greater of $100 million and 50% of the revolving credit commitment. Borrowings under the revolving credit facility are subject to a borrowing base based on Forestar’s book value of its real estate assets and unrestricted cash. The maturity date of the facility is August 16, 2021. The maturity date of the revolving credit facility may be extended by up to one year on up to three occasions, subject to the approval of lenders holding a majority of the commitments. Borrowings and repayments under the facility were $85 million each during the nine months ended June 30, 2019. At June 30, 2019, there were no borrowings outstanding and $21.7 million of letters of credit issued under the revolving credit facility.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. 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. At June 30, 2019, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

In April 2019, Forestar issued $350 million principal amount of 8.0% senior notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The notes are due April 15, 2024, with interest payable semi-annually, and represent unsecured obligations of Forestar. The annual effective interest rate of these notes after giving effect to the amortization of financing costs is 8.5%. These notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreement.

Forestar’s revolving credit facility, its senior notes and its convertible senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt.

Financial Services:

The Company’s mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. 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 60 days in accordance with the terms of the mortgage repurchase facility. In June 2019, the mortgage repurchase facility was amended to increase its total capacity to $900 million; however, the capacity increases, without requiring additional commitments, to $1.1 billion for approximately 30 days at the end of the third quarter and 45 days at fiscal year end. The capacity of the facility can also be increased to $1.2 billion subject to the availability of additional commitments. The maturity date of the facility is February 21, 2020.

As of June 30, 2019, $906.2 million of mortgage loans held for sale with a collateral value of $874.7 million were pledged under the mortgage repurchase facility. DHI Mortgage had an obligation of $796.5 million outstanding under the mortgage repurchase facility at June 30, 2019 at a 4.1% 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 to the lenders monthly. At June 30, 2019, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.