| Item 1.01. | Entry into a Material Definitive Agreement. |
On February 25, 2020, Forestar Group Inc. (the “Company”) completed an offering of $300 million in aggregate principal amount of its 5.000% Senior Notes due 2028 (the “Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes have not been and will not be registered under the Securities Act and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
The Notes were issued under an Indenture, dated as of February 25, 2020 (the “Indenture”), among the Company, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee. The Notes are the Company’s senior unsecured obligations and rank equally with the Company’s other existing and future senior unsecured indebtedness. The notes are fully and unconditionally guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries to the extent such subsidiaries guarantee the Company’s revolving credit facility. The Notes bear interest at a rate of 5.000% per annum and were priced at par. The Notes will pay interest semi-annually in cash in arrears on March 1 and September 1 of each year, commencing on September 1, 2020. The Notes will mature on March 1, 2028.
At any time prior to March 1, 2023, the Company may, on one or more occasions, subject to certain conditions set forth in the Indenture, redeem up to 40% of the aggregate principal amount of the Notes with the net cash proceeds from certain equity offerings at a redemption price of 105.000% of the principal amount of the Notes being redeemed. At any time prior to March 1, 2023, the Company may redeem some or all of the Notes at a redemption price of 100% of the principal amount thereof plus a specified “make whole” premium described in the Indenture. The Company also has the option, at any time on or after March 1, 2023 to redeem some or all of the Notes at the redemption prices set forth in the Indenture.
The Indenture requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the Indenture), the Company shall offer to purchase all of the outstanding Notes at a purchase price in cash equal to 101% of the outstanding principal amount of the Notes, plus accrued and unpaid interest. If the Company or its restricted subsidiaries dispose of assets, under certain circumstances, the Company will be required to either invest the net cash proceeds from such assets sales in its business within a specified period of time, repay certain senior secured debt or debt of itsnon-guarantor subsidiaries, or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount, plus accrued and unpaid interest.
The Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt and make certain investments; incur additional debt or issue mandatorily redeemable equity; incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments. Certain of the covenants will not apply to the Notes so long as the Notes have investment grade ratings from two specified rating agencies.
The terms of the Indenture include customary events of default, including, but not limited to, failure to make payment, failure to comply with the obligations set forth in the Indenture, certain defaults on certain other indebtedness, and invalidity of the guarantees of the Notes issued pursuant to the Indenture.
