Notes Payable

9 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTES PAYABLE

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

	June 30, 2022		September 30, 2021
	(In millions)
Homebuilding
Unsecured:
Revolving credit facility	$	400.0	$	—
4.375% senior notes due 2022 (1)	349.9		349.6
4.75% senior notes due 2023 (1)	299.8		299.5
5.75% senior notes due 2023 (1)	399.5		399.1
2.5% senior notes due 2024 (1)	498.0		497.3
2.6% senior notes due 2025 (1)	496.9		496.2
1.3% senior notes due 2026 (1)	595.2		594.5
1.4% senior notes due 2027 (1)	495.5		494.9
Other secured notes (2)	154.1		82.2
	3,688.9		3,213.3
Forestar
Unsecured:
Revolving credit facility	—		—
3.85% senior notes due 2026 (3)	396.2		395.5
5.0% senior notes due 2028 (3)	296.9		296.5
Other secured notes	12.5		12.5
	705.6		704.5
Financial Services
Mortgage repurchase facility	1,405.7		1,494.6
Rental
Unsecured:
Revolving credit facility	175.0		—
Total (4)	$	5,975.2	$	5,412.4

____________________________

(1)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $13.3 million and $16.5 million at June 30, 2022 and September 30, 2021, respectively.

(2)Homebuilding other secured notes excludes $0.7 million of earnest money notes payable to Forestar at September 30, 2021. These intercompany notes are eliminated in consolidation.

(3)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $6.9 million and $8.0 million at June 30, 2022 and September 30, 2021, respectively.

(4)The fair value of notes payable at June 30, 2022 totaled $5.7 billion, of which $3.5 billion were measured using Level 2 inputs and $2.2 billion were measured using Level 3 inputs. The fair value of notes payable at September 30, 2021 totaled $5.5 billion, of which $3.9 billion were measured using Level 2 inputs and $1.6 billion were measured using Level 3 inputs.

Homebuilding

The Company has a $2.19 billion senior unsecured homebuilding revolving credit facility 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 total revolving credit commitments. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility is April 20, 2026. Borrowings and repayments under the facility totaled $2.5 billion and $2.1 billion, respectively, during the nine months ended June 30, 2022. At June 30, 2022, there were $400 million of borrowings outstanding at a 4.8% annual interest rate and $188.7 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $1.60 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, 2022, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.

The Company’s homebuilding revolving credit facility is guaranteed by D.R. Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

D.R. Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 2021, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

In July 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, 2022.

Forestar

Forestar has a $410 million senior unsecured revolving credit facility 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 total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of Forestar’s real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility is April 16, 2025. At June 30, 2022, there were no borrowings outstanding and $56.0 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $354.0 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.

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 debt of the Company’s homebuilding, financial services or rental operations. At June 30, 2022, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

In April 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, 2022.

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 2022, the mortgage repurchase facility was amended to increase its capacity and extend its maturity date to February 17, 2023. The total capacity of the facility is $1.6 billion; however, the capacity automatically increases during certain higher volume periods and can be further increased through additional commitments. The total capacity of the facility at June 30, 2022 was $2.1 billion.

As of June 30, 2022, $2.1 billion of mortgage loans held for sale with a collateral value of $2.0 billion were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling $632.0 million, DHI Mortgage had an obligation of $1.4 billion outstanding under the mortgage repurchase facility at June 30, 2022 at a 3.3% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, Forestar or rental operations. 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, 2022, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

Rental

On March 4, 2022, the Company’s rental subsidiary, DRH Rental, entered into a $625 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. On March 17, 2022, DRH Rental utilized the accordion feature and increased the size of the facility to $750 million through an additional commitment. 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 total revolving credit commitments. The maturity date of the facility is March 4, 2026. Availability under the revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. At June 30, 2022, the borrowing base limited the available capacity under the facility to $649.6 million. At June 30, 2022, there were $175 million of borrowings outstanding at a 3.1% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $474.6 million.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental 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, 2022, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

DRH Rental’s revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, Forestar or financial services operations.