NOTES PAYABLE

The Company’s notes payable at their principal amounts, net of unamortized discounts and debt issuance costs, consist of the following:



	March 31, 2019		September 30, 2018
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility, maturing 2023	$	750.0	$	—
3.75% senior notes due 2019	—		499.6
4.0% senior notes due 2020	499.2		498.8
2.55% senior notes due 2020	398.4		397.9
4.375% senior notes due 2022	348.6		348.4
4.75% senior notes due 2023	298.8		298.7
5.75% senior notes due 2023	398.2		398.0
Other secured notes	84.0		4.5
	2,777.2		2,445.9
Forestar:
Unsecured:
Revolving credit facility, maturing 2021	35.0		—
3.75% convertible senior notes due 2020	119.5		119.9
	154.5		119.9
Financial Services:
Mortgage repurchase facility, maturing 2020	690.7		637.7
	$	3,622.4	$	3,203.5

Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $6.8 million and $8.5 million at March 31, 2019 and September 30, 2018, respectively. These costs are capitalized into inventory as they are amortized. Forestar’s 3.75% convertible senior notes due 2020 include an unamortized fair value adjustment of $5.3 million and $8.2 million at March 31, 2019 and September 30, 2018, respectively.

Homebuilding:

The Company has a $1.325 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.9 billion, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to approximately 50% of the revolving credit commitment. Letters of credit issued under the facility reduce the available borrowing capacity. The interest rate on borrowings under the revolving credit facility may be based on either the Prime Rate or London Interbank Offered Rate (LIBOR) plus an applicable margin, as defined in the credit agreement governing the facility. The maturity date of the facility is September 25, 2023. Borrowings and repayments under the facility were $1.8 billion and $1.0 billion, respectively, during the six months ended March 31, 2019. At March 31, 2019, there were $750 million of borrowings outstanding at a 3.7% annual interest rate and $128.0 million of letters of credit issued under the revolving credit facility.

The Company’s revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable ratio of debt to tangible net worth and a borrowing base restriction if the Company’s ratio of debt to tangible net worth exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility and the indenture governing the senior notes also impose restrictions on the creation of secured debt and liens. At March 31, 2019, the Company was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and public debt obligations.

D.R. Horton has an automatically effective universal shelf registration statement filed with the SEC in August 2018, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

On March 1, 2019, the Company repaid $500 million principal amount of its 3.75% senior notes at maturity.

Effective August 1, 2018, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities effective through September 30, 2019. All of the $500 million authorization was remaining at March 31, 2019.

Forestar:

Forestar has a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $570 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the revolving credit commitment. Borrowings under the revolving credit facility are subject to a borrowing base based on Forestar’s book value of its real estate assets and unrestricted cash. The maturity date of the facility is August 16, 2021. The maturity date of the revolving credit facility may be extended by up to one year on up to three occasions, subject to the approval of lenders holding a majority of the commitments. At March 31, 2019, there were $35 million of borrowings outstanding at a 4.8% annual interest rate and $3.8 million of letters of credit issued under the revolving credit facility.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At March 31, 2019, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

Forestar also has a secured letter of credit agreement that requires it to deposit cash as collateral with the issuing bank. At March 31, 2019, letters of credit outstanding under the letter of credit facility totaled $15.0 million, secured by $15.7 million in cash, which is included in restricted cash in the consolidated balance sheet.

In April 2019, Forestar issued $350 million principal amount of 8.0% senior notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The notes are due April 15, 2024, with interest payable semi-annually, and represent unsecured obligations of Forestar. The annual effective interest rate of these notes after giving effect to the amortization of financing costs is 8.5%. These notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreement.

Forestar’s revolving credit facility, its senior notes and its convertible senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt.

Financial Services:

The Company’s mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 60 days in accordance with the terms of the mortgage repurchase facility. In February 2019, the mortgage repurchase facility was amended to extend its maturity date to February 21, 2020. The total capacity of the facility is $600 million; however, the capacity increases, without requiring additional commitments, to $725 million for approximately 30 days at each quarter end and to $800 million for approximately 45 days at fiscal year end. The capacity of the facility can also be increased to $1.0 billion subject to the availability of additional commitments. Additional commitments were obtained to increase the capacity of the facility to $800 million for approximately 30 days at the March 2019 quarter end.

As of March 31, 2019, $784.5 million of mortgage loans held for sale with a collateral value of $759.4 million were pledged under the mortgage repurchase facility. DHI Mortgage had an obligation of $690.7 million outstanding under the mortgage repurchase facility at March 31, 2019 at a 4.2% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable ratio of debt to tangible net worth and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At March 31, 2019, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.