Meritage Homes restated and amended its credit facility, loosening covenants after its earnings tripled since it first came to the market in 2002. The new deal eliminates restrictions on dividend payments and stock repurchases and also cuts pricing by 45 basis points. Pricing now sits at LIBOR plus 1 1/4% on an $800 million revolver that has a $250 million accordion feature.
Larry Seay, executive v.p. and cfo, said, "The pricing and covenants on the credit should be more in line with its peers and competitors." One of those comparable deals isStandard Pacific Homes, a homebuilding company based in Irvine, Calif., which amended its Bank of America-led, $1.5 billion revolver priced at LIBOR plus 1% in May. Simultaneously, the company closed a $100 million term loan "A" and a $250 million term loan "B," said Lloyd McKibbin, v.p and treasurer at Standard Pacific. The "B" loan is priced at LIBOR plus 1 1/2%, according to Markit. B of A and JPMorgan lead the Standard Pacific deal. MDC Holdings,Hovnanian and Beazer Homes, homebuilders ranked among the top 10 in residential revenue by Giants - a magazine for business building ideas - had credits priced between 75-150 basis points over LIBOR. Meritage is ranked 14, up a notch from last year.
Guaranty Bank and JPM lead the $1.05 billion facility for Meritage. The Scottsdale, Ariz.-based company previously had a $600 million line priced at LIBOR plus 170 basis points, with Guaranty and Bank One at the helm. That credit also had a $200 million accordion feature.
Both Guaranty and JPM raised their commitments by $15 million, to $100 million and $80 million, respectively. New to the credit are PNC Bank, Bank of Oklahoma and LaSalle Bank which committed to $35 million, $25 million and $25 million, respectively. Old lenders that increased commitments include Citigroup andDeutsche Bank, both of which doubled their commitments from $25 million to $50 million. Wachovia Securities raised its commitment by $30 million to $70 million.
In 2005, Meritage brought in $3 billion in revenue, a $2 billion boost from 2002. Seay said the company's annual growth goal is to climb 15-20% in revenue and continue to expand into the Sunbelt states and up into North Carolina. He said that over the last five years the company has grown 40-50% annually.
In addition, the company holds a 6.25% $350 million note set to mature in 2015 and a 7% $130 million note set to expire in 2014. The notes are rated Ba2 and BB- by Moody's Investors Service and Standard & Poor's.