Bank One has been selected to lead a new $750 million revolving credit for Pulte Homes. Bank One replaces Bank of America, which had led the previous five-year, $570 million credit. The larger size of the line, which also consolidates other credit lines, reflects Pulte's greater need for working capital, a Bank One official said. Bank One put together a similar $1.27 billion deal for Lennar Corp. and Pulte preferred the letter of credit sub limit structure and covenants in that deal, the official added. B of A officials declined to comment. Pulte officials did not return calls.
The five-year loan is divided between a $500 million letter of credit sub limit and a $250 million revolver that will be used for general corporate purposes. Increasingly, homebuilders provide letters of credit instead of cash when optioning new lots for development, which it can do through the credit line's sub limit structure, the official said. Pricing is set at LIBOR plus 1%, with a 20 basis point non-use fee. Commitments are due on Sept. 17 and Bank One officials said it had $200 million from banks late last week. The deal will close at the end of the month.
Although analysts are predicting a large amount of consolidation in the homebuilding industry, Pulte is expected to buy smaller builders and remain a stand-alone player. "The smaller ones are basically going to disappear, but Pulte wants to be a survivor," one banker said. Bloomfield Hills, Mich.-based Pulte builds single-family and adult community homes in 26 states.