Lennar Homebuilding Senior Notes and Other Debts Payable

6 Months Ended

May 31, 2016

Lennar Homebuilding Senior Notes and Other Debts Payable



(Dollars in thousands)	May 31, 2016		November 30, 2015
Unsecured revolving credit facility	$	375,000	—
12.25% senior notes due 2017	397,223		396,252
4.75% senior notes due 2017	398,108		397,736
6.95% senior notes due 2018	248,050		247,632
4.125% senior notes due 2018	273,603		273,319
4.500% senior notes due 2019	497,606		497,210
4.50% senior notes due 2019	597,048		596,622
3.25% convertible senior notes due 2021	331,698		398,194
4.750% senior notes due 2021	496,156		—
4.750% senior notes due 2022	567,864		567,325
4.875% senior notes due 2023	393,739		393,545
4.750% senior notes due 2025	496,004		495,784
2.75% convertible senior notes due 2020	—		233,225
6.50% senior notes due 2016	—		249,905
Mortgage notes on land and other debt	244,136		278,381
	$	5,316,235	5,025,130

The carrying amounts of the senior notes listed above are net of debt issuance costs of $26.1 million and $26.4 million, as of May 31, 2016 and November 30, 2015, respectively.

At May 31, 2016, the Company had a $1.6 billion Credit Facility, which includes a $163 million accordion feature, subject to additional commitments, with certain financial institutions. The maturity for $1.3 billion of the Credit Facility was in June 2019, with the remainder maturing in June 2018. The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. The credit agreement also provides that up to $500 million in commitments may be used for letters of credit. Under the Credit Facility agreement, the Company is required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures. The Company believes it was in compliance with its debt covenants at May 31, 2016. In addition, the Company had $320 million letter of credit facilities with different financial institutions.

Subsequent to May 31, 2016, the Company amended the credit agreement governing its Credit Facility to increase the maximum borrowings from $1.6 billion to $1.8 billion, including a $318 million accordion feature, subject to additional commitments, with certain financial institutions. The maturity for $1.3 billion of the Credit Facility was extended from June 2019 to June 2020 with the remaining $160 million maturing in June 2018.

The Company’s performance letters of credit outstanding were $270.8 million and $236.5 million, respectively, at May 31, 2016 and November 30, 2015. The Company’s financial letters of credit outstanding were $216.6 million and $216.7 million, at May 31, 2016 and November 30, 2015, respectively. Performance letters of credit are generally posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities. Financial letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, at May 31, 2016, the Company had outstanding surety bonds of $1.3 billion including performance surety bonds related to site improvements at various projects (including certain projects in the Company’s joint ventures) and financial surety bonds including $223.4 million related to pending litigation. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of May 31, 2016, there were approximately $468.4 million, or 36%, of anticipated future costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bonds or letters of credit, but if any such draws occur, the Company does not believe they would have a material effect on its financial position, results of operations or cash flows.

In March 2016, the Company issued $500 million aggregate principal amount of 4.750% senior notes due 2021 (the “4.750% Senior Notes”) at a price of 100%. Proceeds from the offering, after payment of expenses, were $496.0 million. The Company used the net proceeds from the sales of the 4.750% Senior Notes to retire its 6.50% senior notes due April 2016 for 100% of the outstanding principal amount, plus accrued and unpaid interest. Interest on the 4.750% Senior Notes is due semi-

annually beginning October 1, 2016. The 4.750% Senior Notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

The 3.25% convertible senior notes due 2021 (the “3.25% Convertible Senior Notes”) are convertible into shares of Class A common stock at any time prior to maturity or redemption at the initial conversion rate of 42.5555 shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes or 17,022,200 shares of Class A common stock if all the 3.25% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $23.50 per share of Class A common stock, subject to anti-dilution adjustments. The shares are included in the calculation of diluted earnings per share. During the six months ended May 31, 2016, holders converted approximately $68 million in aggregate principal amount of the 3.25% Convertible Senior Notes for 2.9 million shares of Class A common stock, plus accrued and unpaid interest through the date of the conversions and small cash premiums. At May 31, 2016 and November 30, 2015, the principal amount of the 3.25% Convertible Senior Notes was $332.5 million and $400.0 million, respectively. The 3.25% Convertible Senior Notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

Subsequent to May 31, 2016, holders converted approximately $137 million aggregate principal amount of the 3.25% Convertible Senior Notes for 5.8 million shares of Class A common stock, plus accrued and unpaid interest through the date of the conversions and small cash premiums.

During the six months ended May 31, 2016, all of the $234 million aggregate outstanding principal amount of the 2.75% convertible senior notes due 2020 (the “2.75% Convertible Senior Notes”) were converted and exchanged by the holders for approximately $234 million in cash and 5.2 million shares of Class A common stock, plus accrued and unpaid interest with respect to the exchanges. The 2.75% Convertible Senior Notes were convertible into cash, shares of Class A common stock or a combination of both, at the Company’s election. However, the Company settled the face value of the 2.75% Convertible Senior Notes in cash. Holders converted the 2.75% Convertible Senior Notes at the initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount, which was equivalent to an initial conversion price of approximately $22.13 per share of Class A common stock. For the three and six months ended May 31, 2016, the calculation for diluted earnings per share included 0.1 million shares and 0.8 million shares, respectively, related to the dilutive effect of the 2.75% Convertible Senior Notes prior to the conversions. For the three and six months ended May 31, 2015, the calculation for diluted earnings per share included 11.0 million shares and 10.7 million shares, respectively, related to the dilutive effect of the 2.75% Convertible Senior Notes.

Although the guarantees by substantially all of the Company's 100% owned homebuilding subsidiaries and some of the Company's other subsidiaries are full, unconditional and joint and several while they are in effect, (i) a subsidiary will cease to be a guarantor at any time when it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company), and (ii) a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.