Loans Payable, Senior Notes and Mortgage Company Loan Facility

3 Months Ended

Jan. 31, 2023

Loans Payable, Senior Notes, and Mortgage Company Loan Facility

Loans Payable

At January 31, 2023 and October 31, 2022, loans payable consisted of the following (amounts in thousands):


	January 31, 2023		October 31, 2022
Senior unsecured term loan	$	650,000	$	650,000

Loans payable – other	497,284		537,043
Deferred issuance costs	(1,638)		(1,768)
	$	1,145,646	$	1,185,275

Senior Unsecured Term Loan

We are party to a $650.0 million senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks. On October 31, 2021, we entered into term loan extension agreements to extend the maturity date of $548.4 million of outstanding term loans from November 1, 2025 to November 1, 2026, with the remainder of the term loans remaining due November 1, 2025. At January 31, 2023, other than $101.6 million of term loans that were scheduled to mature on November 1, 2025, there were no payments required before the final maturity date on the Term Loan Facility. At January 31, 2023, the interest rate on the Term Loan Facility was 5.37% per annum. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit Facility described below.

On February 14, 2023, we entered into an amendment to the Term Loan Facility to extend the maturity date of $487.5 million of outstanding term loans to February 14, 2028, with $60.9 million due on November 1, 2026 and the remaining $101.6 million due on November 1, 2025. In addition, this amendment replaced the LIBOR-based interest rate provisions applicable to borrowings under the Term Loan Facility with Secured Overnight Financing Rate (“SOFR”)-based interest rate provisions.

In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility through October 2025. The spread at January 31, 2023 was 0.80%. These interest rate swaps were designated as cash flow hedges.

Revolving Credit Facility

At January 31, 2023, we had a $1.905 billion, senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. On October 31, 2021, we entered into extension letter agreements which extended the maturity date of $1.78 billion of the revolving loans and commitments under the Revolving Credit Facility from November 1, 2025 to November 1, 2026, with the remainder of the revolving loans and commitments terminating on November 1, 2025. We and substantially all of our 100%-owned home building subsidiaries were guarantors under the Revolving Credit Facility.

Under the terms of the Revolving Credit Facility, at January 31, 2023, our maximum leverage ratio, as defined, was not permitted to exceed 1.75 to 1.00, and we were required to maintain a minimum tangible net worth, as defined, of no less than approximately $4.00 billion. Under the terms of the Revolving Credit Facility, at January 31, 2023, our leverage ratio was approximately 0.38 to 1.00, and our tangible net worth was approximately $6.15 billion. Based upon the terms of the Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately $3.55 billion as of January 31, 2023. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately $2.15 billion as of January 31, 2023.

At January 31, 2023, we had no outstanding borrowings under the Revolving Credit Facility and had approximately $120.4 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At January 31, 2023, the interest rate on outstanding borrowings under the Revolving Credit Facility would have been 5.67% per annum.

On February 14, 2023, we entered into a new five-year senior unsecured revolving credit facility with a syndicate of banks that is scheduled to terminate on February 14, 2028. The new agreement provides for a revolving credit facility with committed borrowing capacity of $1.905 billion. The terms of the new credit facility are substantially the same as those of the Revolving Credit Facility, except that the LIBOR-based interest rate provisions have been replaced with SOFR-based provisions. As with the Revolving Credit Facility, Toll Brothers, Inc. and substantially all of its home building subsidiaries are guarantors of the borrower’s obligations under the new credit facility. In connection with the execution of the new revolving credit facility, the Revolving Credit Facility was terminated.

Loans Payable – Other

“Loans payable – other” primarily represents purchase money mortgages on properties we acquired that the seller had financed, project-level financing, and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At January 31, 2023, the weighted-average interest rate on “Loans payable – other” was 4.19% per annum.

Senior Notes

At January 31, 2023, we had five issues of senior notes outstanding with an aggregate principal amount of $2.00 billion.

In our first quarter of fiscal 2022, we redeemed the remaining $409.9 million principal amount of 5.875% Senior Notes due February 15, 2022, at par, plus accrued interest.

Mortgage Company Loan Facility

Toll Brothers Mortgage Company (“TBMC”), our wholly owned mortgage subsidiary, has a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank, which has been amended from time to time, to finance the origination of mortgage loans by TBMC. The Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” The Warehousing Agreement provides for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement provides for an accordion feature under which TBMC may request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. In April 2022, the Warehousing Agreement was amended and restated to extend the expiration date to March 31, 2023 and borrowings thereunder bear interest at the Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) plus 1.75% per annum (with a BSBY floor of 0.50%). At January 31, 2023, the interest rate on the Warehousing Agreement was 6.26% per annum