8-KMaterial AgreementsFinancial EventsExhibits & Filings

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

Filed September 28, 2017For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) announced a significant amendment to its Credit Agreement, specifically Amendment No. 6, effective September 25, 2017. This amendment is investor-focused as it enhances the company's financial flexibility and borrowing capacity. Key changes include extending the Revolving Credit Facility Termination Date to September 25, 2022, and increasing the Aggregate Revolving Credit Commitments to $1.275 billion. This provides DHI with a longer-term access to liquidity, which is crucial for a homebuilder with ongoing project development and sales cycles. Furthermore, the amendment increases the accordion feature to allow for an additional $637.5 million in commitments, subject to certain conditions, offering substantial room for future growth or operational needs. The company also saw a relaxation of its financial covenants, with the removal of the minimum Tangible Net Worth requirement and a reset of the Leverage Ratio covenant to a more favorable 1.20 to 1.00. These modifications indicate a strengthened financial position and potentially a more favorable credit standing for DHI.

Key Highlights

  • 1Extension of the Revolving Credit Facility Termination Date to September 25, 2022, providing longer-term liquidity.
  • 2Increase in Aggregate Revolving Credit Commitments to $1.275 billion, enhancing borrowing capacity.
  • 3Expansion of the credit agreement's accordion feature to permit up to an additional $637.5 million in commitments.
  • 4Removal of the minimum Tangible Net Worth financial covenant.
  • 5Reset of the Leverage Ratio covenant maximum to 1.20 to 1.00.
  • 6The amendment was entered into with Mizuho Bank, Ltd., as successor Administrative Agent, and other Lenders.

Frequently Asked Questions

Amendment No. 6 significantly enhances D.R. Horton's financial flexibility by extending its primary credit facility's maturity date, increasing its available borrowing capacity, and easing its financial covenants. This provides the company with greater certainty and access to funds for operations and growth over a longer period.

The increase in Aggregate Revolving Credit Commitments to $1.275 billion means D.R. Horton has a larger pool of readily available funds to draw upon. This is particularly beneficial for a homebuilder, allowing for greater investment in land acquisition, construction, and managing working capital needs, especially during periods of expansion or market volatility.

The removal of the minimum Tangible Net Worth covenant and the resetting of the Leverage Ratio to 1.20:1.00 suggest that the lenders have greater confidence in D.R. Horton's financial stability and its ability to manage its debt. These changes reduce the compliance burden on the company and provide more operational leeway.

The accordion feature in a credit agreement allows the borrower to increase the total commitment amount beyond the initial stated limit, subject to certain conditions and the availability of lenders to provide the additional funds. Increasing this feature to $637.5 million provides D.R. Horton with the option to secure substantial additional financing if needed in the future for strategic initiatives or unexpected demands.