Homebuilding Indebtedness

a. Letter of Credit Facilities

As of

December

31,

2016,

in addition to our

$350

million letter of credit sublimit under our Revolving Facility, we were party to

four

committed letter of credit facilities totaling

$48

million, of which

$26.7

million was outstanding. These facilities require cash collateralization and have maturity dates ranging from

January

2017

October

2017.

As of

December

31,

2016,

these facilities were secured by cash collateral deposits of

$27.1

million. Upon maturity, we

may

renew or enter into new letter of credit facilities with the same or other financial institutions.

As of the date of this filing, we are working with

one

financial institution to extend the letter of credit facility which matured in

January

2017

with a commitment amount of

$15

million, of which

$7.2

million of letters of credit remain outstanding.

b. Senior Notes Payable

Senior notes payable, consist of the following at:

	December 31,
	2016		2015
	(Dollars in thousands)
10.75% Senior Notes due September 2016	$	―	$	275,845
8.4% Senior Notes due May 2017		235,175		248,975
8.375% Senior Notes due May 2018		574,501		574,058
1.625% Convertible Senior Notes due May 2018		220,236		301,754
0.25% Convertible Senior Notes due June 2019		253,777		248,098
6.625% Senior Notes due May 2020		319,909		325,882
8.375% Senior Notes due January 2021		395,246		394,152
6.25% Senior Notes due December 2021		297,623		297,148
5.375% Senior Notes due October 2022		249,230		249,096
5.875 % Senior Notes due November 2024		296,982		296,598
5.25 % Senior Notes due June 2026		297,483		―
1.25% Convertible Senior Notes due August 2032		252,046		250,410
	$	3,392,208	$	3,462,016

The carrying amount of the senior notes listed above are net of any discounts, premiums and debt issuance costs that are amortized to interest costs over the respective terms of the notes.

The Company's

1.625%

Convertible Senior Notes due

2018

(the

"1.625%

Convertible 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

1.625%

Convertible Notes bear interest at a rate of

1.625%

per year and will mature on

May

15,

2018,

unless earlier converted or repurchased. The holders

may

convert their

1.625%

Convertible Notes at any time into shares of the Company's common stock at a conversion rate of

31.8576

shares of common stock per

$1,000

of their principal amount (which is equal to a conversion price of approximately

$31.39

per share), subject to adjustment. The Company

may

not redeem the

1.625%

Convertible Notes prior to the stated maturity date.

The Company's

0.25%

Convertible Senior Notes due

2019

(the

"0.25%

Convertible 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

0.25%

Convertible Notes bear interest at a rate of

0.25%

per year and will mature on

June

2019,

unless earlier converted, redeemed or repurchased. The holders

may

convert their

0.25%

Convertible Notes at any time into shares of the Company's common stock at a conversion rate of

13.6043

shares of common stock per

$1,000

of their principal amount (which is equal to a conversion price of approximately

$73.51

per share), subject to adjustment. The Company

may

not redeem the

0.25%

Convertible Notes prior to

June

2017.

On or after that date, the Company

may

redeem for cash any or all of the

0.25%

Convertible Notes, at its option, if the closing sale price of its common stock for at least

trading days (whether or not consecutive) during any

consecutive trading day period ending within

trading days immediately preceding the date on which it provides notice of redemption, including the last trading day of such

day trading period, exceeds

130

percent of the applicable conversion price on each applicable trading day. The redemption price will equal

100

percent of the principal amount of the

0.25%

Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company's

1.25%

Convertible Senior Notes due

2032

(the

"1.25%

Convertible 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

1.25%

Convertible Notes bear interest at a rate of

1.25%

per year and will mature on

August

2032,

unless earlier converted, redeemed or repurchased. The holders

may

convert their

1.25%

Convertible Notes at any time into shares of the Company's common stock at a conversion rate of

24.8941

shares of common stock per

$1,000

of their principal amount (which is equal to a conversion price of approximately

$40.17

per share), subject to adjustment. The Company

may

not redeem the

1.25%

Convertible Notes prior to

August

2017.

On or after

August

2017

and prior to the maturity date, the Company

may

redeem for cash all or part of the

1.25%

Convertible Notes at a redemption price equal to

100%

of the principal amount of the

1.25%

Convertible Notes being redeemed. On each of

August

2017,

August

2022

and

August

2027,

holders of the

1.25%

Convertible Notes

may

require the Company to purchase all or any portion of their

1.25%

Convertible Notes for cash at a price equal to

100%

of the principal amount of the

1.25%

Convertible Notes to be repurchased.

Our senior notes payable are all senior obligations and rank equally with our other existing senior indebtedness and, with the exception of our Convertible Notes, are redeemable at our option, in whole or in part, pursuant to a "make whole" formula. These notes contain various restrictive covenants, including, but not limited to, a limitation on secured indebtedness and a restriction on sale leaseback transactions. As of

December

31,

2016,

we were in compliance with the covenants required by our senior notes.

Many of our

100%

owned direct and indirect subsidiaries (collectively, the "Guarantor Subsidiaries") guarantee our outstanding senior notes. The guarantees are full and unconditional, and joint and several. Under our most restrictive indenture, a Guarantor Subsidiary will be released and relieved of any obligations under the applicable note guarantee in the event that i) such Guarantor Subsidiary ceases to be a restricted subsidiary in the homebuilding segment or ii) in the event of a sale or other disposition of such Guarantor Subsidiary, in compliance with the indenture, and such Guarantor Subsidiary ceases to guaranty any other debt of the Company. Please see Note

for supplemental financial statement information about our guarantor subsidiaries group and non-guarantor subsidiaries group.

During the

2016

second

quarter, the Company issued

$300

million in aggregate principal amount of

5.25%

Senior Notes due

2026,

which are senior unsecured obligations of the Company and are guaranteed by the guarantors of our other senior notes on a senior unsecured basis. A portion of the net proceeds of this issuance was used to repay the remaining

$280

million principal balance of our

10.75%

Senior Notes upon maturity in

September

2016.

c. 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,

2016,

we had approximately

$27.6

million outstanding in secured project debt and other notes payable.

d. 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)
2017	$	246,958
2018		809,274
2019		268,399
2020		300,448
2021		700,000
Thereafter		1,103,000
Total principal amount		3,428,079
Less: Net (discount) premium		5,525
Less: Debt issuance costs		(13,817	)
Total homebuilding debt	$	3,419,787

The weighted average interest rate of our borrowings outstanding under our revolving credit facility, senior and convertible senior notes payable, secured project debt and other notes payable as of

December

31,

2016,

2015

and

2014,

was

5.7%,

6.1%,

and

7.2%,

respectively.

e. Revolving Credit Facility

As of

December

31,

2016,

we were party to a

$750

million unsecured revolving credit facility (the "Revolving Facility"),

$350

million of which is available for letters of credit, which matures in

October

2019.

The Revolving Facility has an accordion feature under which the Company

may

increase the total commitment up to a maximum aggregate amount of

$1.2

billion, subject to certain conditions, including the availability of additional bank commitments. Interest rates, as defined in the credit agreement, approximate (i) LIBOR (approximately

0.77%

December

31,

2016)

plus

1.75%,

or (ii) Prime

(3.75%

December

31,

2016)

plus

0.75%.

In addition to customary representations and warranties, the facility contains financial and other covenants, including a minimum tangible net worth requirement of

$1.65

billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), a net homebuilding leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding

2.00

1.00

and a land covenant that limits land not under development to an amount not to exceed tangible net worth. The Company is also required to maintain either (a) a minimum liquidity level (unrestricted cash in excess of interest incurred for the previous

four

quarters) or (b) a minimum interest coverage ratio (EBITDA to interest expense, as defined therein) of at least

1.25

1.00.

We were in compliance with all of the Revolving Facility covenants as of

December

31,

2016.

The Revolving Facility also limits, among other things, the Company’s investments in joint ventures and the amount of the Company’s common stock that the Company can repurchase. On

December,

2016,

we had no borrowings outstanding under the facility and had outstanding letters of credit issued under the facility totaling

$112.1

million, leaving

$637.9

million available under the facility to be drawn.