Notes Payable

9 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTES PAYABLE

The Company’s notes payable at their carrying amounts consist of the following:

	June 30, 2021		September 30, 2020
	(In millions)
Homebuilding:
Unsecured:
Revolving credit facility	$	—	$	—
364-day revolving credit facility (1)	—		—
2.55% senior notes due 2020 (2)	—		399.8
4.375% senior notes due 2022 (2)	349.5		349.2
4.75% senior notes due 2023 (2)	299.5		299.2
5.75% senior notes due 2023 (2)	399.0		398.7
2.5% senior notes due 2024 (2)	497.1		496.5
2.6% senior notes due 2025 (2)	496.0		495.1
1.4% senior notes due 2027 (2)	494.7		—
Other secured notes (3)	82.8		71.1
	2,618.6		2,509.6
Forestar:
Unsecured:
Revolving credit facility	—		—
8.0% senior notes due 2024 (4)(5)	—		345.2
3.85% senior notes due 2026 (5)	395.2		—
5.0% senior notes due 2028 (5)	296.4		295.9
Other secured notes	12.5		—
	704.1		641.1
Financial Services:
Mortgage repurchase facility	1,093.6		1,132.6
	$	4,416.3	$	4,283.3

____________________________

(1)The Company’s $375 million 364-day senior unsecured homebuilding revolving credit facility was not renewed upon its maturity on May 27, 2021.

(2)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $12.3 million and $10.7 million at June 30, 2021 and September 30, 2020, respectively.

(3)Homebuilding other secured notes excludes $1.4 million and $4.8 million of earnest money notes payable due to Forestar at June 30, 2021 and September 30, 2020, respectively. These intercompany notes are eliminated in consolidation.

(4)Forestar’s 8.0% senior notes due April 15, 2024 were redeemed in May 2021.

(5)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $8.4 million and $8.9 million at June 30, 2021 and September 30, 2020, respectively.

Homebuilding:

In April 2021, the Company’s senior unsecured homebuilding revolving credit facility was amended to increase its capacity to $2.19 billion with an uncommitted accordion feature that could increase the size of the facility to $3.0 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 100% 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 LIBOR plus an applicable margin, as defined in the credit agreement governing the facility. The maturity date of the facility was extended to April 20, 2026. At June 30, 2021, there were no borrowings outstanding and $159.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.03 billion.

The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if the leverage ratio 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 indentures governing the senior notes also impose restrictions on the creation of secured debt and liens. At June 30, 2021, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding 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.

In October 2020, the Company issued $500 million principal amount of 1.4% senior notes due October 15, 2027, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 1.6%. In December 2020, the Company repaid $400 million principal amount of its 2.55% senior notes at maturity.

Effective July 30, 2019, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities. The authorization has no expiration date. All of the $500 million authorization was remaining at June 30, 2021.

Forestar:

In April 2021, Forestar’s senior unsecured revolving credit facility was amended to increase its capacity to $410 million with an uncommitted accordion feature that could increase the size of the facility to $600 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 calculation based on Forestar’s book value of its real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility was extended to April 16, 2025. Borrowings and repayments under the facility were $25 million each during the nine months ended June 30, 2021. At June 30, 2021, there were no borrowings outstanding and $60.2 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $349.8 million.

The Forestar 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 June 30, 2021, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

In April 2021, Forestar issued $400 million principal amount of 3.85% senior notes that mature May 15, 2026 with interest payable semi-annually. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 4.1%. The net proceeds from this issuance were primarily used to redeem Forestar’s $350 million principal amount of 8.0% senior notes due 2024 in May 2021. The redemption price of $365.6 million included a call premium of $14.0 million and accrued and unpaid interest of $1.6 million. Forestar recognized an $18.1 million loss on extinguishment of debt upon redemption of the notes.

Forestar’s revolving credit facility and its senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the Company’s homebuilding debt. At June 30, 2021, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Effective April 30, 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at June 30, 2021.

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. The total capacity of the facility is $1.4 billion; however, the capacity increases, without requiring additional commitments, to $1.6 billion for approximately 30 days at each quarter end and 45 days at fiscal year end. The capacity of the facility can also be increased to $1.8 billion, subject to the availability of additional commitments. Through additional commitments, the total capacity of the facility was temporarily increased to $1.6 billion effective June 11, 2021 through November 4, 2021. During this period, the capacity increases, without requiring additional commitments, to $1.8 billion for approximately 30 days at the end of the third quarter and for 45 days at fiscal year end. The maturity date of the facility is February 18, 2022.

As of June 30, 2021, $1.5 billion of mortgage loans held for sale with a collateral value of $1.5 billion were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling $410.2 million, DHI Mortgage had an obligation of $1.1 billion outstanding under the mortgage repurchase facility at June 30, 2021 at a 2.1% 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 leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At June 30, 2021, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.