8-KMaterial AgreementsFinancial EventsExhibits & Filings

HORTON D R INC /DE/ 8-K Report, Material Agreement (Feb 28, 2017)

Filed February 28, 2017For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) announced a significant update to its financing arrangements through its subsidiary, DHI Mortgage Company, Ltd. The company entered into a Fourth Amendment to its Second Amended and Restated Master Repurchase Agreement, effectively enhancing its liquidity and operational flexibility. This amendment, effective February 24, 2017, increases the maximum aggregate commitment amount of the repurchase facility to $600 million, with an accordion feature that allows for expansion up to $1 billion. Notably, the facility also provides for temporary increases to $725 million and $800 million around fiscal quarter and year ends, indicating a strategic build-up of funds to support peak operational demands. Furthermore, the Fourth Amendment brings favorable terms, including a 7.5 basis point reduction in the effective interest rate paid by DHI Mortgage, which is expected to lower borrowing costs. The term of the facility has also been extended to February 23, 2018, providing a stable financing runway. It's important for investors to note that the amounts outstanding under this facility are not guaranteed by the parent company, D.R. Horton, Inc., or its homebuilding debt guarantors. This move underscores DHI's proactive management of its financial resources to support its mortgage operations.

Key Highlights

  • 1DHI Mortgage Company, Ltd., a DHI subsidiary, entered into a Fourth Amendment to its Master Repurchase Agreement.
  • 2The maximum aggregate commitment amount under the repurchase facility has been increased to $600 million.
  • 3An accordion feature allows the facility to potentially expand up to $1 billion with additional buyer commitments.
  • 4Temporary increases in commitment amounts are available ($725M around fiscal quarters, $800M at year-end) to manage seasonal or peak demand.
  • 5The effective interest rate paid by DHI Mortgage is reduced by 7.5 basis points (0.075%).
  • 6The term of the Amended Repurchase Facility has been extended to February 23, 2018.
  • 7Amounts outstanding under this facility are not guaranteed by the parent company D.R. Horton, Inc. or its homebuilding debt guarantors.

Frequently Asked Questions

The Master Repurchase Agreement (and its amendments) provides DHI Mortgage with financing and liquidity. It facilitates purchase transactions where DHI Mortgage transfers eligible loans to buyers in exchange for funds, essentially allowing DHI Mortgage to access capital by leveraging its loan portfolio.

The increase to $600 million, with potential expansion to $1 billion, provides DHI Mortgage with greater access to capital. This enhanced liquidity supports its operations, potentially allowing for increased loan origination or the ability to manage larger volumes of loans, especially during periods of high demand or market opportunities.

A reduction of 7.5 basis points in the effective interest rate lowers the cost of borrowing for DHI Mortgage. This directly benefits the company's profitability by reducing interest expenses associated with this financing facility.

These temporary increases are strategic. They are designed to provide DHI Mortgage with additional capital during periods when it might experience higher volumes of activity, such as increased loan closings or a buildup of inventory, ensuring sufficient liquidity to meet its obligations and operational needs.