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Borrowings |
At September 30, 2011 and 2010, we had the following
long-term debt (in thousands):
As of September 30, 2011, future maturities of our
borrowings, excluding our Mandatory Convertible Subordinated
Notes which are convertible to common stock upon maturity, are
as follows (in thousands):
Secured Revolving Credit Facility. On
August 5, 2009, we entered into an amendment to our Secured
Revolving Credit Facility that reduced the size of the facility
to $22 million. The Secured Revolving Credit Facility is
provided by one lender. The Secured Revolving Credit Facility
provides for future working capital and letter of credit needs
collateralized by either cash or assets of the Company at our
option, based on certain conditions and covenant compliance. As
of September 30, 2011, we have elected to cash
collateralize all letters of credit; however, we have pledged
approximately $1.0 billion of inventory assets to our
Senior Secured Revolving Credit Facility to collateralize
potential future borrowings or letters of credit. The Secured
Revolving Credit Facility contains certain covenants, including
negative covenants and financial maintenance covenants, with
which we are required to comply. Subject to our option to cash
collateralize our obligations under the Secured Revolving Credit
Facility upon certain conditions, our obligations under the
Secured Revolving Credit Facility are secured by liens on
substantially all of our personal property and a significant
portion of our owned real properties. There were no outstanding
borrowings under the Secured Revolving Credit Facility as of
September 30, 2011. In July 2011, we further amended our
Secured Revolving Credit Facility to extend its maturity to
August 2012.
We have entered into stand-alone, cash-secured letter of credit
agreements with banks to maintain our pre-existing letters of
credit and to provide for the issuance of new letters of credit.
The letter of credit arrangements
combined with our Senior Secured Revolving Credit Facility
provide a total letter of credit capacity of approximately
$92.1 million. As of September 30, 2011 and 2010, we
have secured letters of credit using cash collateral in
restricted accounts totaling $28.9 million and
$38.8 million, respectively. The Company may enter into
additional arrangements to provide additional letter of credit
capacity.
Senior Notes — The majority of our Senior Notes are
unsecured or secured obligations ranking pari passu with all
other existing and future senior indebtedness. Substantially all
of our significant subsidiaries are full and unconditional
guarantors of the Senior Notes and are jointly and severally
liable for obligations under the Senior Notes and the Secured
Revolving Credit Facility. Each guarantor subsidiary is a 100%
owned subsidiary of Beazer Homes.
The indentures under which the Senior Notes were issued contain
certain restrictive covenants, including limitations on payment
of dividends. At September 30, 2011, under the most
restrictive covenants of each indenture, no portion of our
retained earnings was available for cash dividends or for share
repurchases. The indentures provide that, in the event of
defined changes in control or if our consolidated tangible net
worth falls below a specified level or in certain circumstances
upon a sale of assets, we are required to offer to repurchase
certain specified amounts of outstanding Senior Notes.
Specifically, certain indentures require us to offer to purchase
10% of the original amount of the Senior Notes at par if our
consolidated tangible net worth (defined as stockholders’
equity less intangible assets) is less than $85 million at
the end of any two consecutive fiscal quarters. If triggered and
fully subscribed, this could result in our having to purchase
$62.5 million of notes, based on the original amounts of
the applicable notes; however, this amount may be reduced by
certain Senior Note repurchases (potentially at less than par)
made after the triggering date. As of September 30, 2011,
our consolidated tangible net worth was $153.1 million.
On January 8, 2010, we redeemed our
85/8% Senior
Notes due 2011 at par totaling $127.3 million. This
redemption resulted in a loss on debt extinguishment of
$0.9 million due primarily to the acceleration of debt
discount and issuance costs. In May 2010, we redeemed our
83/8% Senior
Notes due 2012 at par for a total of $303.6 million. This
redemption resulted in a loss on debt extinguishment of
$2.9 million, which included the acceleration of debt
issuance cost amortization. In addition, during the fiscal year
ended September 30, 2010, we redeemed for cash all of the
outstanding Convertible Senior Notes for a total of
$155.5 million. The redemption resulted in a loss on debt
extinguishment of $6.2 million, which included the
acceleration of debt issuance cost amortization.
On September 11, 2009, we issued and sold $250 million
aggregate principal amount of our 12% Senior Secured Notes
due 2017 (Senior Secured Notes) through a private placement. The
Senior Secured Notes were issued at a price of 89.5% of their
face amount (before underwriting and other issuance costs).
Interest on the Senior Secured Notes is payable semi-annually in
cash in arrears. During the quarter ended March 31, 2010,
we completed an offer to exchange substantially all of the
$250 million Senior Secured Notes, which were registered
under the Securities Act of 1933. The Senior Secured Notes were
issued under an indenture, dated as of September 11, 2009.
The indenture contains covenants which, subject to certain
exceptions, limit the ability of the Company and its restricted
subsidiaries to, among other things, incur additional
indebtedness, engage in certain asset sales, make certain types
of restricted payments, engage in transactions with affiliates
and create liens on assets of the Company. Upon a change of
control, as defined, the indenture requires us to make an offer
to repurchase the Senior Secured Notes at 101% of their
principal amount, plus accrued and unpaid interest. If we sell
certain assets and do not reinvest the net proceeds in
compliance with the indenture, then we must use the net proceeds
to offer to repurchase the Senior Secured Notes at 100% of their
principal amount, plus accrued and unpaid interest. After
October 15, 2012, we may redeem some or all of the Senior
Secured Notes at redemption prices set forth in the indenture.
The Senior Secured Notes are secured on a second priority basis
by, subject to exceptions specified in the related agreements,
substantially all of the tangible and intangible assets of the
Company as defined.
In May 2010, we issued $300 million aggregate principal
amount of
91/8% Senior
Notes due June 15, 2018. Interest on these notes is payable
semi-annually in cash in arrears, commencing on June 15,
2010. These notes are unsecured and rank equally with our
unsecured indebtedness. We may, at our option, redeem the
91/8% Senior
Notes
in whole or in part at any time at specified redemption prices
which include a “make whole” provision through
June 15, 2014.
Also in May 2010, we issued 3 million, publicly traded,
7.25% tangible equity units (TEUs) which were comprised of
prepaid stock purchase contracts and senior amortizing notes.
The two components of the TEUs are legally separate and
detachable, there are no beneficial conversion features
associated with these instruments, and we have accounted for the
two components as separate items for financial reporting
purposes and valued them based on their relative fair value at
the date of issuance. The amortizing notes are unsecured senior
obligations and rank equally with all of our other unsecured
indebtedness and had an aggregate initial principal amount of
$15.7 million as determined under the relative fair value
method. The prepaid stock purchase contracts will convert to
Beazer Homes stock on August 15, 2013 based on the
applicable settlement factor, as defined in the offering
agreement, which will be between 3.5126 share per unit and
4.3029 shares per unit, and were recorded as additional
paid-in-capital
at their relative fair value at the date of issuance
($57.4 million). The TEU notes pay quarterly installments
of principal and interest aggregating approximately
$1.4 million per quarter through August 15, 2013, and
in the aggregate, these installments will be equivalent to a
7.25% cash payment per year with respect to each $25 stated
amount of the TEUs. If we elect to settle the prepaid stock
purchase contracts early, we may be required to repurchase
certain amortizing notes, plus accrued and unpaid interest as
provided for in the TEU agreement. The related prepaid stock
purchase contracts will be settled in Beazer Homes’ common
stock on August 15, 2013 and have been accounted for as
equity in the accompanying Consolidated Balance Sheets.
In November 2010, we issued $250 million aggregate
principal amount of
91/8% Senior
Notes due May 15, 2019 in a private placement. Interest on
these notes is payable semi-annually in cash in arrears,
commencing on May 15, 2011. These notes are unsecured and
rank equally with our unsecured indebtedness. We may, at our
option, redeem the
91/8% Senior
Notes in whole or in part at any time at specified redemption
prices which include a “make whole” provision through
May 15, 2014. During fiscal year 2011, we offered to
exchange substantially all of the $250 million
91/8% Senior
Notes due 2019 for notes that were publically traded and
registered under the Securities Act of 1933. Approximately
$250 million of the
91/8% Senior
Notes were exchanged for the publically traded and registered
91/8% Senior
Notes during the fourth quarter of fiscal 2011.
During fiscal 2011, we redeemed or repurchased in open market
transactions $209.5 million principal amount of our Senior
Notes ($164.5 million of
61/2% Senior
Notes due 2013, $37.0 million of
67/8% Senior
Notes due 2015 and $8.0 million of
81/8% Senior
Notes due 2016). The aggregate purchase price was
$210.0 million, plus accrued and unpaid interest as of the
purchase date. The redemption/repurchase of the notes resulted
in a $2.9 million pre-tax loss on extinguishment of debt,
net of unamortized discounts and debt issuance costs related to
these notes. All Senior Notes redeemed/repurchased by the
Company were cancelled.
As of September 30, 2011, we were in compliance with all
covenants under our Senior Notes.
Mandatory Convertible Subordinated Notes. On
January 12, 2010, we issued $57.5 million aggregate
principal amount of
71/2%
Mandatory Convertible Subordinated Notes due 2013 (the Mandatory
Convertible Subordinated Notes). Interest on the Mandatory
Convertible Subordinated Notes is payable quarterly in cash in
arrears. Holders of the Mandatory Convertible Subordinated Notes
have the right to convert their notes, in whole or in part, at
any time prior to maturity, into shares of our common stock at a
fixed conversion rate of 5.4348 shares per $25 principal
amount of notes. At maturity, the remaining notes will
automatically convert into the Company’s common stock at a
defined conversion rate which will range from 4.4547 to 5.4348
(the initial conversion rate) shares per $25 principal amount of
notes based on the then current price of the common stock. The
securities are subordinated to nonconvertible debt, the
conversion feature is non-detachable and there are no beneficial
conversion features associated with this debt. If our
consolidated tangible net worth is less than $85 million as
of the last day of a fiscal quarter, the Company has the right
to require holders to convert all of the notes then outstanding
for shares of our common stock at the maximum conversion rate
plus a conversion premium as described in the agreement.
Junior Subordinated Notes. On June 15,
2006, we completed a private placement of $103.1 million of
unsecured junior subordinated notes which mature on
July 30, 2036 and are redeemable at par on or after
July 30, 2011 and pay a fixed rate of 7.987% for the first
ten years ending July 30, 2016. Thereafter, the securities
have a floating interest rate equal to three-month LIBOR plus
2.45% per annum, resetting quarterly. These notes were issued to
Beazer Capital Trust I, which simultaneously issued, in a
private transaction, trust preferred securities and common
securities with an aggregate value of $103.1 million to
fund its purchase of these notes. The transaction is treated as
debt in accordance with GAAP. The obligations relating to these
notes and the related securities are subordinated to the Secured
Revolving Credit Facility and the Senior Notes.
On January 15, 2010, we completed an exchange of
$75 million of our trust preferred securities issued by
Beazer Capital Trust I for a new issue of $75 million
of junior subordinated notes due July 30, 2036 issued by
the Company (the New Junior Notes). The exchanged trust
preferred securities and the related junior subordinated notes
issued in 2006 were cancelled effective January 15, 2010.
The material terms of the New Junior Notes are identical to the
terms of the original trust securities except that when the New
Junior Notes change from a fixed rate to a variable rate in
August 2016, the variable rate is subject to a floor of 4.25%
and a cap of 9.25%. In addition, the Company now has the option
to redeem the New Junior Notes beginning on June 1, 2012 at
75% of par value and beginning on June 1, 2022, the
redemption price of 75% of par value will increase by 1.785% per
year.
The aforementioned exchange has been accounted for as an
extinguishment of debt as there has been a significant
modification of cash flows and, as such, the New Junior Notes
were recorded at their estimated fair value at the exchange
date. Over the remaining life of the New Junior Notes, we will
increase their carrying value until this carrying value equals
the face value of the notes. During fiscal 2010, we recorded a
pre-tax gain on extinguishment of $53.6 million in
connection with this exchange. As of September 30, 2011,
the unamortized accretion was $51.2 million and will be
amortized over the remaining life of the notes.
As of September 30, 2011, we were in compliance with all
covenants under our Junior Notes.
Cash Secured Loans. In November 2010, we
entered into two separate loan facilities for a combined total
of $275 million. Borrowing under the cash secured loan
facilities will replenish cash used to repay or repurchase the
Company’s debt and would be considered “refinancing
indebtedness” under certain of the Company’s existing
indentures and debt covenants. However, because the loans are
fully collateralized by cash equal to the loan amount, the loans
do not provide liquidity to the Company.
The lenders of these facilities may put the outstanding loan
balances to the Company at the two or four year anniversaries of
the loan. The loan matures in seven years. Borrowings under the
facilities are fully secured by cash held by the lender or its
affiliates. This secured cash is reflected as restricted cash on
our consolidated balance sheet as of September 30, 2011. We
borrowed $32.6 million at inception of the loans. As
previously indicated and in order to protect financing capacity
available under our covenant refinancing basket related to
previous or future debt repayments, we borrowed an additional
$214.8 million under the cash secured loan facilities in
the quarter ended June 30, 2011. The cash secured loan has
an interest rate equivalent to LIBOR plus 0.4% per annum which
is paid every three months following the effective date of each
borrowing.
Other Secured Notes Payable. We periodically
acquire land through the issuance of notes payable. As of
September 30, 2011 and 2010, we had outstanding notes
payable of $2.3 million and $10.8 million,
respectively, primarily related to land acquisitions. These
notes payable expire between 2012 and 2016 and have a weighted
average fixed rate of 7.135% at September 30, 2011. The
notes are secured by the real estate to which they relate.
The agreements governing these secured notes payable contain
various affirmative and negative covenants. There can be no
assurance that we will be able to obtain any future waivers or
amendments that may become necessary without significant
additional cost or at all. In each instance, however, a covenant
default can be cured by repayment of the indebtedness.
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