Home builder D.R. Horton received a $30 million add-on credit two weeks ago upon the completion of its merger with Schuler Homes, increasing the size of its new $775 million credit line to $805 million. The deal follows the company's refinancing of an existing $775 million, four-year revolver at the end of last month which was maturing this April. Bank participants on Schuler Homes' existing First Hawaiian Bank-led $300 million revolver offered the additional $30 million to D.R. Horton as part of an agreement whereby D.R. Horton paid down Schuler's existing line. The add-on credit, which will be used for working capital purposes, was contingent upon the closing of the merger deal, explained Sam Fuller, executive v.p. and cfo of D.R. Horton.
The company's original $775 credit facility was led by Bank of America. Fuller declined to comment on the other banks involved in both stages of the deal. The company wanted the $775 million line refinanced as soon as possible, said Fuller. "The worst thing you could do is go into the negotiation when they know you need it," he added. The new $805 million credit is currently priced at LIBOR plus 15/ 8% basis points along a leverage-based grid, has an unused facility fee of 25 basis points, and has $125 million available for letters of credit.
The former $775 million facility was priced at LIBOR plus 95 basis points, had an unused facility fee of 20 basis points, and offered $50 million for letters of credit in addition to the revolver. "We think that it's better than what most other similarly situated builders could get," said Fuller, regarding the increase in pricing and new structure. "We have a longstanding relationship with them and their predecessors," said Fuller, explaining his choice to refinance with B of A.