| | Item 1.01. | Entry into a Material Definitive Agreement. |
Revolving Credit Facility
Effective August 16, 2018, Forestar Group Inc.(“Forestar”or the “Company”) entered into a Credit Agreement with the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”) with respect to a three-year $380 million senior unsecured revolving credit facility(the “Credit Facility”orthe “Facility”). The Credit Facility has an uncommitted $190 million accordion feature which could increase the Facility to up to $570 million (subject to certain conditions and availability of additional bank commitments) and, in addition to availability for loans, provides for the issuance of letters of credit in an amount equal to the greater of (x) $100 million and (y) 50% of the total amount of credit commitments. Availability under the Facility is subject to a borrowing base determined based on the book value of the Company’s real estate assets and unrestricted cash. Pricing under the Facility is determined based on the Company’s Leverage Ratio as defined in the Credit Agreement.
The Credit Facility will mature on August 16, 2021 and includes customary affirmative and negative covenants, events of default, and financial covenants. The financial covenants require the Company to maintain a minimum level of tangible net worth, a minimum level of liquidity, and a leverage ratio below a maximum level.
The description and terms of the Credit Facility provided herein are qualified in their entirety by reference to the full and complete terms contained in the Credit Agreement governing the Facility which is attached to this Form8-K as Exhibit 10.1. Capitalized terms not defined herein are defined in the Credit Agreement.
Amendment to Letter of Credit Facility
Effective August 16, 2018, the Company, through its wholly-owned subsidiary, Forestar (USA) Real Estate Group Inc.(“Forestar Real Estate”) amended(“First Amendment”) its secured standby letter of credit facility(the“LC Facility”) dated October 5, 2017.
The First Amendment releases Synovus Bank(“Synovus”) as an issuer of letters of credit under the LC Facility and provides that the outstanding letters of credit issued by Synovus are deemed to be outstanding letters of credit under the Company’s new Credit Facility discussed above.
The First Amendment reduces the capacity of the LC Facility from $30 million to approximately $15.4 million and provides for a corresponding release of cash collateral in the amount of approximately $13.8 million. From and after the First Amendment effective date, the LC Facility capacity and related cash collateral shall automatically be reduced by the undrawn stated amount of each letter of credit that terminates or expires by its terms or is surrendered for cancellation.
The First Amendment extends the maturity date of the LC Facility to October 5, 2019.
The foregoing description of the First Amendment to the LC Facility does not purport to be complete and is qualified in its entirety by reference to the First Amendment, a copy of which is filed herewith as Exhibit 10.2 and is incorporated by reference herein.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
All the information set forth above under Item 1.01 is hereby incorporated by reference into this Item 2.03.
