Notes Payable

12 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Notes Payable

NOTES PAYABLE

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

	September 30,
	2021		2020
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility	$	—	$	—
364-day revolving credit facility (1)	—		—
2.55% senior notes due 2020 (2)	—		399.8
4.375% senior notes due 2022 (2)	349.6		349.2
4.75% senior notes due 2023 (2)	299.5		299.2
5.75% senior notes due 2023 (2)	399.1		398.7
2.5% senior notes due 2024 (2)	497.3		496.5
2.6% senior notes due 2025 (2)	496.2		495.1
1.3% senior notes due 2026 (2)	594.5		—
1.4% senior notes due 2027 (2)	494.9		—
Other secured notes (3)	82.2		71.1
	3,213.3		2,509.6
Forestar:
Unsecured:
Revolving credit facility	—		—
8.0% senior notes due 2024 (4)(5)	—		345.2
3.85% senior notes due 2026 (5)	395.5		—
5.0% senior notes due 2028 (5)	296.5		295.9
Other secured notes	12.5		—
	704.5		641.1
Financial Services:
Mortgage repurchase facility	1,494.6		1,132.6
	$	5,412.4	$	4,283.3

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See footnotes on following page.

(1)The Company’s $375 million 364-day senior unsecured homebuilding revolving credit facility was not renewed upon its maturity in May 2021.

(2)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $16.5 million and $10.7 million at September 30, 2021 and 2020, respectively.

(3)Homebuilding other secured notes excludes $0.7 million and $4.8 million of earnest money notes payable to Forestar at September 30, 2021 and 2020, respectively. These intercompany notes are eliminated in consolidation.

(4)Forestar’s 8.0% senior notes due April 2024 were redeemed in May 2021.

(5)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $8.0 million and $8.9 million at September 30, 2021 and 2020, respectively.

As of September 30, 2021, maturities of consolidated notes payable, assuming the mortgage repurchase facility is not extended or renewed, are $1.9 billion in fiscal 2022, $700.3 million in fiscal 2023, $13.7 million in fiscal 2024, $500.4 million in fiscal 2025, $900.4 million in fiscal 2026 and $1.4 billion thereafter.

Homebuilding:

In April 2021, the Company’s senior unsecured homebuilding revolving credit facility was amended to increase its capacity to $2.19 billion with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments. The maturity date of the facility was extended to April 20, 2026. 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 LIBOR plus an applicable margin, as defined in the credit agreement governing the facility. At September 30, 2021, there were no borrowings outstanding and $187.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.0 billion.

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 indentures governing the senior notes also impose restrictions on the creation of secured debt and liens. At September 30, 2021, 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 SEC in July 2021, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

In October 2020, the Company issued $500 million principal amount of 1.4% senior notes due October 15, 2027, 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 1.6%. In December 2020, the Company repaid $400 million principal amount of its 2.55% senior notes at maturity. In August 2021, the Company issued $600 million principal amount of 1.3% senior notes due October 15, 2026, 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 1.5%.

The key terms of the Company’s homebuilding senior notes outstanding as of September 30, 2021 are summarized below.

Notes Payable	Principal Amount	Date Issued	Date Due	Redeemable Prior to Maturity (1)	Effective Interest Rate (2)
	(In millions)
4.375% senior notes	$350	September 2012	September 15, 2022	Yes	4.5%
4.75% senior notes	$300	February 2013	February 15, 2023	Yes	4.9%
5.75% senior notes	$400	August 2013	August 15, 2023	Yes	5.9%
2.5% senior notes	$500	October 2019	October 15, 2024	Yes	2.7%
2.6% senior notes	$500	May 2020	October 15, 2025	Yes	2.8%
1.3% senior notes	$600	August 2021	October 15, 2026	Yes	1.5%
1.4% senior notes	$500	October 2020	October 15, 2027	Yes	1.6%

_____________

(1)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 discounted to the redemption date, plus accrued and unpaid interest. In addition, the 4.375% senior notes, 4.75% senior notes and 5.75% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is three months prior to the final maturity date of the notes. The 2.5% senior notes, the 2.6% senior notes and the 1.3% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is one month prior to the final maturity date of the notes. The 1.4% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is two months prior to the final maturity of the notes.

(2)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 debt issuance costs and the discount, if applicable.

All series of homebuilding senior notes and borrowings under the homebuilding 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 homebuilding senior notes and borrowings under the homebuilding revolving credit facilities are guaranteed by entities that hold approximately 80% of the Company’s assets. Upon the occurrence of both a change of control of the Company and a ratings downgrade event, as defined in the indentures governing its senior notes, 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 facilities, which could result in the acceleration of any borrowings outstanding under the facilities and the termination of the commitments thereunder.

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 September 30, 2021.

Forestar:

In April 2021, Forestar’s senior unsecured revolving credit facility was amended to increase its capacity to $410 million with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments. The maturity date of the facility was extended to April 16, 2025. 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 calculation 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. Borrowings and repayments under the facility totaled $58.0 million each during fiscal 2021. At September 30, 2021, there were no borrowings outstanding and $60.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $349.7 million.

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.

In April 2021, Forestar issued $400 million principal amount of 3.85% senior notes that mature May 15, 2026 with interest payable semi-annually. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 4.1%. The net proceeds from this issuance were primarily used to redeem Forestar’s $350 million principal amount of 8.0% senior notes due 2024 in May 2021. The redemption price of $365.6 million included a call premium of $14.0 million and accrued and unpaid interest of $1.6 million. Forestar recognized an $18.1 million loss on extinguishment of debt upon redemption of the notes. Forestar also has $300 million principal amount of 5.0% senior notes that mature March 1, 2028. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 5.2%. Forestar’s senior notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreements.

Forestar’s revolving credit facility and its senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt. At September 30, 2021, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Effective April 30, 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at September 30, 2021.

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 $1.4 billion; however, the capacity automatically increases during certain higher volume periods and can be further increased through additional commitments. The total capacity of the facility at September 30, 2021 was $1.8 billion, and its maturity date is February 18, 2022.

As of September 30, 2021, $1.9 billion of mortgage loans held for sale with a collateral value of $1.9 billion were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling $362.4 million, DHI Mortgage had an obligation of $1.5 billion outstanding under the mortgage repurchase facility at September 30, 2021 at a 2.1% 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 leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At September 30, 2021, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.