Debt

Debt consists of:



	At Year-End
	2017		2016
	(In thousands)
8.50% senior secured notes due 2022	—		5,200
3.75% convertible senior notes due 2020, net of discount	108,139		104,673
Other indebtedness due through 2018 at variable and fixed interest rates ranging from 5.0% to 5.50%	290		485
	$	108,429	$	110,358

Letter of Credit Facility

On October 5, 2017, we entered into a Letter of Credit Facility Agreement providing for a $30,000,000 secured standby letter of credit facility (the “LC Facility”). The LC Facility is secured by $30,000,000 in cash deposited with the administrative agent. In addition, we have $10,000,000 on deposit with a participating lender. The total of these two deposits are classified as restricted cash on our consolidated balance sheets. At year-end 2017, $14,072,000 was outstanding under the LC Facility.

Termination of Senior Credit Facility

On October 5, 2017, in connection with entry into the LC Facility, we terminated our existing senior credit facility (the “Prior Credit Facility”). The Prior Credit Facility provided for a $50,000,000 revolving line of credit that was scheduled to mature on May 15, 2018. This Prior Credit Facility could be prepaid at any time without penalty and included a $50,000,000 sublimit for letters of credit. All outstanding letters of credit at the time of termination were transferred to the new LC Facility.

8.50% Senior Secured Notes due 2022

On October 30, 2017, we redeemed the remaining $5,315,000 aggregate principal amount of outstanding 8.50% Senior Secured Notes due 2022 (the “Notes”). The Notes were redeemed for $5,928,000 and the redemption resulted in a $524,000 loss on extinguishment of debt.

In 2016, we completed a cash tender offer for our Notes, pursuant to which we purchased $215,495,000 principal amount of the outstanding Notes. Total consideration paid was $245,604,000, which included $29,091,000 in premium and $1,018,000 in accrued and unpaid interest. In addition, we received consent from holders of the Notes to eliminate or modify certain covenants, events of default and other provisions contained in the indenture governing the Notes, and to release the subsidiary guarantees and collateral securing the Notes. We also purchased $9,750,000 principal amount of the Notes in open market transactions. The cash tender offer and open market purchases resulted in a $35,681,000 loss on extinguishment of debt, which included the premium paid to repurchase the Notes, write-off of unamortized debt issuance costs of $5,416,000 and $1,301,000 in other costs.

3.75% Convertible Senior Notes due 2020

In 2013, we issued $125,000,000 aggregate principal amount of 3.75% Convertible Senior Notes due 2020 (Convertible Notes). Interest on the Convertible Notes is payable semiannually at a rate of 3.75 percent per annum and they mature on March 1, 2020. The Convertible Notes had an initial conversion rate of 40.8351 per $1,000 principal amount. The initial conversion rate was subject to adjustment upon the occurrence of certain events. Prior to November 1, 2019, the Convertible Notes are convertible only upon certain circumstances, and thereafter are convertible at any time prior to the close of business on the second scheduled trading day prior to maturity.

On October 5, 2017, we had $120,000,000 aggregate principal amount of Convertible Notes outstanding. In connection with the consummation of the Merger, we entered into a Third Supplemental Indenture (together with the base indenture and the prior supplemental indentures, the "Indenture") to the Indenture relating to our Convertible Notes.

Pursuant to the Third Supplemental Indenture, the Convertible Notes are no longer convertible into shares of our pre-merger common stock (“Former Forestar Common Stock”) and instead are convertible into cash and shares of our post-merger common stock (“New Forestar Common Stock”) based on the per-share weighted average of the cash and shares of New Forestar Common Stock received by our stockholders that affirmatively made an election in connection with the Merger. As a result of such elections, for each share of Former Forestar Common Stock a holder of Convertible Notes was previously entitled to receive upon conversion of Convertible Notes, such holder is instead entitled to receive $579.77062 in cash and 8.17192 shares of New Forestar Common Stock per $1,000 principal amount of Notes surrendered for conversion.

The completion of the Merger constituted a Fundamental Change, as defined in the Indenture. On October 12, 2017, in accordance with the Indenture, we gave notice of the Fundamental Change to holders of the Convertible Notes and made an offer to purchase (a “Fundamental Change Offer”) all or any part (equal to $1,000 or an integral multiple of $1,000) of every holder’s Convertible Notes. Under this offer, we repurchased $1,077,000 of Notes, and recorded a loss on extinguishment of debt of $87,000.

At year-end 2017, unamortized debt discount of our Convertible Notes was $9,726,000. The effective interest rate on the liability component was 8 percent and the carrying amount of the equity component was $16,847,000. We intend to settle the principal amount of Convertible Notes in cash upon conversion, with any excess conversion value to be settled in shares of our common stock.

In 2016, we purchased $5,000,000 of 3.75% Convertible Senior Notes due 2020 at 93.25 percent of face value in open market transactions for $4,663,000 and we allocated $4,452,000 to extinguish the debt and $211,000 to reacquire the equity component within the convertible notes based on the fair value of the debt component. We recognized a $110,000 loss on extinguishment of debt based on the difference between the fair value of the debt component prior to conversion and the carrying value of the debt component. Total loss on extinguishment of debt including write-off of debt issuance costs allocated to the repurchased notes was $183,000.

Deferred Fees and Debt Maturities

At year-end 2017 and 2016, we have $1,058,000 and $1,633,000 in unamortized deferred fees which were deducted from our debt. Amortization of deferred financing fees was $979,000 in 2017, $3,598,000 in 2016 and $4,002,000 in 2015 and is included in interest expense.

Debt maturities during the next five years are: 2018 — $290,000; 2019 — $0; 2020 — $108,139,000; 2021 — $0; 2022 — $0 and thereafter — $0.