Note 6 - Homebuilding Indebtedness

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Text Block]

6. Homebuilding Indebtedness

a. Letter of Credit Facilities

As of December 31, 2012, we were party to two committed letter of credit facilities totaling $11 million, of which $7.2 million was outstanding.  In addition, as of such date, we also had a $30 million uncommitted letter of credit facility, of which $18.9 million was outstanding.  These facilities require cash collateralization and have maturity dates ranging from September 2013 to November 2013.  As of December 31, 2012 these facilities were secured by cash collateral deposits of $26.5 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,
	2012			2011
		(Dollars in thousands)
6.25% Senior Notes due April 2014		$	4,971	$	4,971
7% Senior Notes due August 2015			29,789		29,789
10.75% Senior Notes due September 2016, net of discount			265,823		262,968
8.375% Senior Notes due May 2018, net of premium			579,832		580,523
8.375% Senior Notes due January 2021, net of discount			397,087		396,842
1.25% Convertible Senior Notes due August 2032			253,000		―
		$	1,530,502	$	1,275,093

    In September 2009, we issued $280 million of 10.75% Senior Notes due September 15, 2016 (the “2016 Notes”).  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.

 In May 2010, we issued $300 million of 8.375% 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 8.375% Senior Notes due January 15, 2021 (the “2021 Notes”) (issued at a discount to yield approximately 8.50% under the effective interest method), which have been reflected net of their unamortized premium and discount, respectively, in the accompanying consolidated balance sheets.

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 contain various restrictive covenants, including, with respect to the 2016 Notes, 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 maximum leverage condition or a minimum 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, 2012, 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, 2012, we had approximately $175.0 million of cash available in our unrestricted subsidiaries.  Many of our 100% 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 16 for supplemental financial statement information about our guarantor subsidiaries group and non-guarantor subsidiaries group.

On July 31, 2012, we issued $253 million of 1.25% Convertible Senior Notes due 2032 (the “Convertible Notes”).  The Notes are senior unsecured obligations of the Company and are guaranteed by the guarantors of our other senior notes on a senior unsecured basis.

The Convertible Notes bear interest at a rate of 1.25% and will mature on August 1, 2032, unless earlier converted, redeemed or repurchased.  The holders may at any time convert their Convertible Notes into shares of the Company's common stock at an initial conversion rate of 123.7662 shares of common stock per $1,000 principal amount of Convertible Notes (which is equal to an initial conversion price of approximately $8.08 per share), subject to adjustment.

The Company may not redeem the Convertible Notes prior to August 5, 2017.  On or after August 5, 2017 and prior to the maturity date, the Company may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes being redeemed.  On each of August 1, 2017, August 1, 2022 and August 1, 2027, holders of the Convertible Notes may require the Company to purchase all or any portion of their Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes to be repurchased.

c. Senior Subordinated Notes Payable

Senior subordinated notes payable consisted of the following at:

	December 31,
	2012		2011
	(Dollars in thousands)
6% Convertible Senior Subordinated Notes due October 2012, net of discount (1)	$	―		$	36,339
9.25% Senior Subordinated Notes due April 2012, net of discount (2)		―			9,985
	$	―		$	46,324

__________________

(1) The 6% Convertible Senior Subordinated Notes were repaid in full upon maturity in October 2012.

(2) The 9.25% Senior Subordinated Notes were repaid in full upon maturity in April 2012.

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 acquisition, development and infrastructure costs for which we are responsible.  At December 31, 2012, we had approximately $11.5 million outstanding in secured project debt and other notes payable.

e. Borrowings and Maturities

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

	Year Ended December 31,
	(Dollars in thousands)
2013	$	4,790
2014		9,766
2015		31,181
2016		280,539
2017		―
Thereafter		1,228,000
Total principal amount		1,554,276
Less: Net (discount) premium		(12,258	)
Total homebuilding debt	$	1,542,018

The weighted average interest rate of our borrowings outstanding under our revolving credit facility, bank term loans, senior and convertible senior notes payable, secured project debt and other notes payable (excluding indebtedness included in liabilities from inventories not owned) as of December 31, 2012, 2011 and 2010, was 7.6%, 8.9%, and 8.9%, respectively.

f. Revolving Credit Facility

On October 19, 2012, we amended our $210 million unsecured revolving credit facility (the “Revolving Facility”) to, among other things, increase the aggregate commitment to $350 million (all of which is available for letters of credit), provide an accordion feature that allows for an increase in the aggregate commitment to $550 million (subject to the availability of additional bank commitments and certain other conditions), and to extend the maturity date of $320 million of the commitment to October 19, 2015.  As of December 31, 2012, the Revolving Facility contained financial covenants, including, but not limited to, (i) a minimum consolidated tangible net worth covenant; (ii) 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.  The amendment eliminated the minimum liquidity level covenant and provided that the failure to meet the minimum interest coverage ratio is not an event of default, but rather upon such occurrence, the Company’s borrowing availability under the Revolving Facility may become more limited.  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 December 31, 2012 we satisfied the conditions that would allow us to borrow up to $283.3 million under the facility and had no amounts outstanding.