Notes Payable

3 Months Ended

Dec. 31, 2019

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



	December 31, 2019		September 30, 2019
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility	$	—	$	—
4.0% senior notes due 2020 (1)	499.9		499.6
2.55% senior notes due 2020 (1)	399.1		398.9
4.375% senior notes due 2022 (1)	348.9		348.8
4.75% senior notes due 2023 (1)	299.0		298.9
5.75% senior notes due 2023 (1)	398.4		398.4
2.5% senior notes due 2024 (1)	495.8		—
Other secured notes	28.9		103.0
	2,470.0		2,047.6
Forestar:
Unsecured:
Revolving credit facility	—		—
3.75% convertible senior notes due 2020 (2)	119.0		119.1
8.0% senior notes due 2024 (3)	344.1		343.8
	463.1		462.9
Financial Services:
Mortgage repurchase facility	850.2		888.9
	$	3,783.3	$	3,399.4

_______________


(1)	Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $8.6 million and $5.4 million at December 31, 2019 and September 30, 2019, respectively.


(2)	Forestar’s 3.75% convertible senior notes due March 2020 include an unamortized fair value adjustment of $1.0 million and $2.4 million at December 31, 2019 and September 30, 2019, respectively.


(3)	Debt issuance costs that were deducted from the carrying amount of Forestar’s 8.0% senior notes totaled $5.9 million and $6.2 million at December 31, 2019 and September 30, 2019, respectively.

Homebuilding:

The Company has a $1.59 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.5 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 100% 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 October 2, 2024. At December 31, 2019, there were no borrowings outstanding and $141.7 million of letters of credit issued under the revolving credit facility, resulting in available capacity of approximately $1.4 billion. There were no borrowings or repayments under the facility during the three months ended December 31, 2019.

The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if the leverage ratio 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 December 31, 2019, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.

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

In October 2019, the Company issued $500 million principal amount of 2.5% senior notes due October 15, 2024, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 2.7%.

Effective July 30, 2019, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities. The authorization has no expiration date. All of the $500 million authorization was remaining at December 31, 2019.

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. Letters of credit issued under the facility reduce the available borrowing capacity. At December 31, 2019, there were no borrowings outstanding and $28.7 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $351.3 million. The maturity date of the facility is October 2, 2022, which can be extended by up to one year on up to two additional occasions, subject to the approval of lenders holding a majority of the commitments.

The Forestar 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 December 31, 2019, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

At December 31, 2019, the principal amount of Forestar’s 3.75% convertible senior notes was $118.9 million. Forestar intends to settle these notes in cash upon their maturity on March 1, 2020, with any excess conversion value to be settled in shares of its common stock. At December 31, 2019, Forestar was in compliance with all of the limitations and restrictions associated with its senior note obligations.

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. The total capacity of the facility is $900 million, which can be increased to $1.2 billion subject to the availability of additional commitments. In December 2019, the Company received an additional commitment of $50 million increasing the total capacity of the facility to $950 million. The additional commitment expired on January 26, 2020. The Company is currently in discussions with its lenders and expects to renew and extend the facility on similar terms prior to its February 21, 2020 maturity date.

As of December 31, 2019, $953.7 million of mortgage loans held for sale with a collateral value of $915.1 million were pledged under the mortgage repurchase facility. DHI Mortgage had an obligation of $850.2 million outstanding under the mortgage repurchase facility at December 31, 2019 at a 3.5% 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 leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At December 31, 2019, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.