Notes Payable

12 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Notes Payable

NOTES PAYABLE

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

	September 30,
	2023		2022
	(In millions)
Homebuilding
Unsecured:
Revolving credit facility	$	—	$	—
4.75% senior notes due 2023 (1)	—		299.9
5.75% senior notes due 2023 (1)	—		399.6
2.5% senior notes due 2024 (1)	499.0		498.2
2.6% senior notes due 2025 (1)	498.0		497.1
1.3% senior notes due 2026 (1)	596.6		595.5
1.4% senior notes due 2027 (1)	496.5		495.7
Other secured notes	239.8		156.6
	2,329.9		2,942.6
Rental
Unsecured:
Revolving credit facility	400.0		800.0
Forestar
Unsecured:
Revolving credit facility	—		—
3.85% senior notes due 2026 (2)	397.4		396.5
5.0% senior notes due 2028 (2)	297.6		297.0
Other secured notes	—		12.5
	695.0		706.0
Financial Services
Mortgage repurchase facilities:
Committed facility	1,373.3		1,618.3
Uncommitted facility	296.3		—
	1,669.6		1,618.3
Total notes payable	$	5,094.5	$	6,066.9

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(1)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $8.4 million and $12.2 million at September 30, 2023 and 2022, respectively.

(2)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $5.0 million and $6.5 million at September 30, 2023 and 2022, respectively.

As of September 30, 2023, maturities of consolidated notes payable, assuming the mortgage repurchase facility is not extended or renewed, are $1.9 billion in fiscal 2024, $522.7 million in fiscal 2025, $1.3 billion in fiscal 2026, $607.2 million in fiscal 2027, $800 million in fiscal 2028 and none thereafter.

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 October 28, 2027. At September 30, 2023, there were no borrowings outstanding and $226.6 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $1.96 billion.

In February 2023, the Company repaid $300 million principal amount of its 4.75% senior notes at maturity, and in July 2023, the Company redeemed $400 million principal amount of its 5.75% senior notes due August 2023. The senior notes were redeemed at a price equal to 100% of the principal amount of the notes, together with accrued and unpaid interest.

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 September 30, 2023, 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 and homebuilding senior notes are 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 SEC in July 2021, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

The key terms of the Company’s homebuilding senior notes outstanding as of September 30, 2023 are summarized below.

Notes Payable	Principal Amount	Date Issued	Date Due	Redeemable Prior to Maturity (1)	Effective Interest Rate (2)
	(In millions)
2.5% senior notes	$500	October 2019	October 15, 2024	Yes	2.7%
2.6% senior notes	$500	May 2020	October 15, 2025	Yes	2.8%
1.3% senior notes	$600	August 2021	October 15, 2026	Yes	1.5%
1.4% senior notes	$500	October 2020	October 15, 2027	Yes	1.6%

_____________

(1)The Company may redeem the notes in whole at any time or in part from time to time, at a redemption price equal to the greater of 100% of their principal amount or the present value of the remaining scheduled payments discounted to the redemption date, plus accrued and unpaid interest. In addition, the 2.5% senior notes, the 2.6% senior notes and the 1.3% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is one month prior to the final maturity date of the notes. The 1.4% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is two months prior to the final maturity of the notes.

(2)Interest is payable semi-annually on each of the series of senior notes. The annual effective interest rate is calculated after giving effect to the amortization of debt issuance costs and the discount, if applicable.

All series of homebuilding senior notes and borrowings under the homebuilding revolving credit facility are senior obligations and rank pari passu in right of payment to all existing and future unsecured indebtedness and senior to all existing and future indebtedness expressly subordinated to them. The homebuilding senior notes and borrowings under the homebuilding revolving credit facility are guaranteed by entities that hold approximately 76% of the Company’s assets. Upon the occurrence of both a change of control of the Company and a ratings downgrade event, as defined in the indentures governing its senior notes, the Company would be required in certain circumstances to offer to repurchase these notes at 101% of their principal amount, along with accrued and unpaid interest. Also, a change of control as defined in the revolving credit facility would constitute an event of default under the revolving credit facility, which could result in the acceleration of any borrowings outstanding under the facility and the termination of the commitments thereunder.

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 September 30, 2023.

Rental

The Company’s rental subsidiary, DRH Rental, has a $1.025 billion 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. Availability under the rental 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. 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. Borrowings and repayments under the facility totaled $700 million and $1.1 billion, respectively, during fiscal 2023. At September 30, 2023, there were $400 million of borrowings outstanding at a 7.7% annual interest rate, and no letters of credit issued under the facility, resulting in available capacity of $625 million.

In October 2023, DRH Rental’s credit facility was amended to extend its maturity date to October 10, 2027 and to increase its accordion feature to allow for an increase in the size of the facility up to $2.0 billion, subject to certain conditions and availability of additional bank commitments.

The rental 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 September 30, 2023, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The rental 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.

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 October 28, 2026. At September 30, 2023, there were no borrowings outstanding and $27.7 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $382.3 million.

As of September 30, 2023, Forestar had $700 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar. These notes include $400 million principal amount of 3.85% senior notes that mature May 15, 2026 and $300 million principal amount of 5.0% senior notes that mature March 1, 2028. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 4.1% and 5.2%, respectively. Forestar’s senior notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreements.

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 September 30, 2023, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or financial services operations.

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 September 30, 2023.

Financial Services

The Company’s mortgage subsidiary, DHI Mortgage, has two mortgage repurchase facilities, one of which is committed and the other of which is uncommitted, that provide financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to 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 in accordance with the terms of the mortgage repurchase facilities.

The committed mortgage repurchase facility has a total capacity of $2.0 billion and a maturity date of February 16, 2024. The capacity of the committed mortgage repurchase facility can be increased to $2.3 billion subject to the availability of additional commitments. At September 30, 2023, DHI Mortgage had an obligation of $1.4 billion under the committed mortgage repurchase facility at a 6.9% annual interest rate.

In April 2023, DHI Mortgage entered into a master repurchase agreement providing for an uncommitted mortgage repurchase facility. At September 30, 2023, DHI Mortgage could borrow up to $300 million under the uncommitted mortgage repurchase facility and had an obligation of $296.3 million at a 6.6% annual interest rate.

As of September 30, 2023, $2.22 billion of mortgage loans held for sale with a collateral value of $2.18 billion were pledged under the committed mortgage repurchase facility, and $323.0 million of mortgage loans held for sale with a collateral value of $300.9 million were pledged under the uncommitted mortgage repurchase facility.

The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity. At September 30, 2023, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

These mortgage repurchase facilities are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or Forestar operations.