Note 6 - Homebuilding Indebtedness

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

6. Homebuilding Indebtedness

a. Letter of Credit Facilities

As of December 31, 2011, we were party to two committed letter of credit facilities totaling $21 million, of which $7.3 million was outstanding.  In addition, as of such date, we also had a $30 million uncommitted letter of credit facility, of which $23.6 million was outstanding.  These facilities require cash collateralization and have maturity dates ranging from October 2012 to November 2013.  As of December 31, 2011 these facilities were secured by cash collateral deposits of $31.3 million.  Upon maturity, we may renew or enter into new letter of credit facilities with the same or other financial institutions.

b. Senior Notes Payable

Senior notes payable consist of the following at:

	December 31,
	2011		2010
	(Dollars in thousands)
6¼% Senior Notes due April 2014	$	4,971	$	4,971
7% Senior Notes due August 2015		29,789		29,789
10¾% Senior Notes due September 2016, net of discount		262,968		260,439
8⅜% Senior Notes due May 2018, net of premium		580,523		581,162
8⅜% Senior Notes due January 2021, net of discount		396,842		396,616
	$	1,275,093	$	1,272,977

    In September 2009, a Standard Pacific Corp. subsidiary issued $280 million of 10¾% Senior Notes due September 15, 2016 (the “2016 Notes”).  We assumed our subsidiary’s obligations under the 2016 Notes in October 2009.  These notes were issued at a discount to yield approximately 12.50% under the effective interest method and have been reflected net of the unamortized discount in the accompanying consolidated balance sheets.  Interest on the 2016 Notes is due and payable on March 15 and September 15 of each year until maturity.

 In May 2010, we issued $300 million of 8⅜% Senior Notes due May 15, 2018 (the “2018 Notes”).  In December 2010, we issued an additional $275 million of 2018 Notes (issued at a premium to yield approximately 7.964% under the effective interest method) and $400 million of 8⅜% Senior Notes due January 15, 2021 (issued at a discount to yield approximately 8.50% under the effective interest method), and have been reflected net of their unamortized premium and discount, respectively, in the accompanying consolidated balance sheets.  Interest on the 2018 Notes is due and payable on May 15 and November 15 of each year until maturity and interest on the 2021 Notes is due and payable on January 15 and July 15 of each year until maturity.

The senior notes payable described above are all senior obligations and rank equally with our other existing senior indebtedness and are redeemable at our option, in whole or in part, pursuant to a “make whole” formula. These senior notes described above and our 9¼% Senior Subordinated Notes due 2012 noted below, contain various restrictive covenants, including, with respect to the 10¾% Senior Notes due 2016, a limitation on additional indebtedness and a limitation on restricted payments.  Under the limitation on additional indebtedness, we are permitted to incur specified categories of indebtedness but are prohibited, aside from those exceptions, from incurring further indebtedness if we do not satisfy either a leverage condition or an interest coverage condition.  Under the limitation on restricted payments, we are also prohibited from making restricted payments (which include dividends, and investments in and advances to our joint ventures and other unrestricted subsidiaries), if we do not satisfy either condition.  Our ability to make restricted payments is also subject to a basket limitation.  As of December 31, 2011, we were able to satisfy the conditions necessary to incur additional indebtedness and to make restricted payments.  In addition, if we were unable to satisfy either the leverage condition or interest coverage condition, restricted payments could be made from our unrestricted subsidiaries.  As of December 31, 2011, we had approximately $341.0 million of cash available in our unrestricted subsidiaries.

Many of our wholly owned direct and indirect subsidiaries (collectively, the “Guarantor Subsidiaries”) guaranty our outstanding senior notes and our senior subordinated notes. The guarantees are full and unconditional, and joint and several.  Please see Note 19 for supplemental financial statement information about our guarantor subsidiaries group and non-guarantor subsidiaries group.

c. Senior Subordinated Notes Payable

Senior subordinated notes payable consisted of the following at:

	December 31,
		2011		2010
		(Dollars in thousands)
6% Convertible Senior Subordinated Notes due October 2012, net of discount		$	36,339	$	32,564
9¼% Senior Subordinated Notes due April 2012, net of discount			9,985		9,975
		$	46,324	$	42,539

On September 28, 2007, we issued $100 million of 6% Convertible Senior Subordinated notes (the “Convertible Notes”) due October 1, 2012.  In connection with this offering, we also entered into a convertible note hedge transaction designed to reduce equity dilution associated with the potential conversion of the Convertible Notes to our common stock.  The conversion rate applicable to our Convertible Notes is 119.5312 shares of our common stock per $1,000 principal amount of the Convertible Notes (equivalent to a conversion price of $8.37), and is subject to adjustments as provided in the indenture governing the Convertible Notes.  Certain provisions of ASC 470 require bifurcation of a component of convertible debt instruments, classification of that component in stockholders’ equity, and then accretion of the resulting discount on the debt to result in interest expense equal to the issuer’s nonconvertible debt borrowing rate.  We adopted these new provisions of ASC 470 as of January 1, 2009 related to our Convertible Notes resulting in the remaining balance of the Convertible Notes to be accreted to its redemption value, approximately $39.6 million, over the remaining term of these notes.  The unamortized discount of the Convertible Notes, which was included in additional paid-in capital, was $3.3 million and $7.0 million at December 31, 2011 and 2010, respectively.

To facilitate transactions by which investors in the Convertible Notes may hedge their investments in such Convertible Notes, we entered into a share lending facility, dated September 24, 2007, with an affiliate of one of the underwriters in the Convertible Notes offering, under which we agreed to loan to the share borrower up to approximately 7.8 million shares of our common stock for a period beginning on the date we entered into the share lending facility and ending on October 1, 2012, or, if earlier, the date as of which we have notified the share borrower of our intention to terminate the facility after the entire principal amount of the Convertible Notes ceases to be outstanding as a result of conversion, repurchase or redemption, or earlier in certain circumstances.  During the 2009 third quarter, 3.9 million of the shares issued under the share lending facility were returned to us, and as of December 31, 2011, 3.9 million of these shares remained outstanding.

d. Secured Project Debt and Other Notes Payable

Our secured project debt and other notes payable consist of seller non-recourse financing and community development district and similar assessment district bond financings used to finance land development and infrastructure costs for which we are responsible.  At December 31, 2011, we had approximately $3.5 million outstanding in secured project debt and other notes payable.

e. Borrowings and Maturities

The principal amount of maturities of senior and senior subordinated notes payable, and secured project debt and other notes payable are as follows:

	Year Ended December 31,
	(Dollars in thousands)
2012	$	50,802
2013		989
2014		6,314
2015		29,789
2016		280,000
Thereafter		975,000
Total principal amount		1,342,894
Less: Net (discount) premium		(17,946	)
Total homebuilding debt	$	1,324,948

The weighted average interest rate of our borrowings outstanding under our revolving credit facility, bank term loans, senior and senior subordinated notes payable, secured project debt and other notes payable (excluding indebtedness included in liabilities from inventories not owned) as of December 31, 2011, 2010 and 2009, was 8.9%, 8.9%, and 8.1%, respectively.

f. Revolving Credit Facility

On February 28, 2011, we entered into a $210 million unsecured revolving credit facility with a bank group (the “Revolving Facility”).  The Revolving Facility matures in February 2014 and has an accordion feature under which the aggregate commitment may be increased up to $400 million, subject to the availability of additional bank commitments and certain other conditions.  The Revolving Facility contains financial covenants, including, but not limited to, (i) a minimum consolidated tangible net worth covenant; (ii) a covenant to maintain either (a) a minimum liquidity level or (b) a minimum interest coverage ratio; (iii) a maximum net homebuilding leverage ratio and (iv) a maximum land not under development to tangible net worth ratio.  This facility also contains a borrowing base provision, which limits the amount we may borrow or keep outstanding under the facility, and also contains a limitation on our investments in joint ventures.  Interest rates charged under the Revolving Facility include LIBOR and prime rate pricing options.  As of the date hereof, we satisfied the conditions that would allow us to borrow up to $190.5 million under the facility and had no amounts outstanding.